MPs wrangle with tax reform proposals
A more efficient Government could emerge alongside changes to the tax system in efforts to shore up the public purse, MPs heard last night.
It was hoped a balance would be struck between trying to increase income while also cutting costs.
Legislators debated the Report of the Tax Reform Commission 2018, which put forward a series of proposals that could boost government revenues by $147 million over two to three years.
It came after a seven-member bipartisan group was tasked with carrying out a “thorough review” of the island’s tax regime after a 2017 Throne Speech pledge by the Progressive Labour Party administration.
The group was asked to find ways to increase public sector revenue from 17 per cent of GDP to a minimum of 20 to 22 per cent and determine any steps that could be taken to allow for a more equitable system.
Its report, which took nine months to compile, proposed new taxes along with reforms to existing taxes.
Curtis Dickinson, the Minister of Finance, told the House of Assembly he continued to review the recommendations and had not yet made any decision on which of those would be implemented.
He said the challenges included a net debt of approximately $2.45 billion, an ageing population, increasing healthcare costs and an economy that is progressing “slowly”.
Members heard the ministry aimed for a “balanced approach” that looked at revenue increases but also made Government more efficient.
Mr Dickinson told the House there was “widespread support” for more effective tax collection and said his team was exploring ways to offer greater support to the “under resourced” Office of the Tax Commissioner.
He added: “I believe the best way to resolve our fiscal challenges is to grow our economy through the creation of more well-paying jobs.
“A growing economy leads to a broader tax base with more participants and through the law of averages an ability to spread our tax burden across a broader number of people.
“While remaining mindful of the important and significant contributions that big business makes to our economy, we need to continue to work on policies that help entrepreneurs, small and medium sized businesses to thrive.”
Patricia Gordon-Pamplin, the Opposition’s finance spokeswoman in the House, said the Governments was “not in the business” of being profitmaking organisations.
She continued: “What we would expect to see in the choices that are made is that Government will make the necessary selection from the recommendations that would balance our budget.
“We’re not looking for a whole lot of extra money, we’re not looking for money that on the backs of the taxpayers will go to grow a burgeoning Government, that is not the intent.”
Ms Gordon-Pamplin said it was important not to have “an assault on the taxpayer” and highlighted the need for Government to understand its responsibility to reduce costs.
She voiced reservations about taxation of passive income as there are a “significant number” of seniors who rely on such funds, and said the Government needed to be careful when adjusting payroll tax to make sure it did not become a disincentive for growth.
Wayne Furbert, Junior Minister of Finance, said the focus of the report was to find ways to make Bermuda’s tax system fairer.
Mr Furbert said: “We have to accept on both sides that the tax system that we have is not equitable or fair.
“If we can accept that, then we can move on to how can we make it equitable.”
He added that Government should not rely solely on cutting expenditure to balance the budget, reminding the House of the furore caused by the One Bermuda Alliance’s use of furlough days to reduce costs.
Craig Cannonier, Opposition leader, said the Government needed to consider how it could help the island’s struggling retail sector, which employs more Bermudians than any area other than Government.
Mr Cannonier said: “Businesses are struggling in the economy we have now. We feel that the taxation system is unfair and far behind where it should be.”
He said retailers often have difficulty with cashflow because they have to pay taxes on items when they come to the island rather than at sale.
Mr Cannonier said this is particularly a burden on small and medium sized businesses, along with those trying to enter the retail sector.
He added that immigration must also play a part in revitalising the economy.
Scott Pearman, the Shadow Minister of Legal Affairs, was among several MPs who noted that the Commission was not asked to directly address Government spending.
He said the “lion’s share” of the recommendations were four new taxes — a rental tax, a general services tax, a tax on interest and dividends and what he called “an outsourcing tax”, which would apply to services contracted out by local companies to foreign service providers.
Mr Pearman claimed that aside from the rental tax, none of the four were easily calculable or collectable.
He added: “These proposals at their heart mean more tax on Bermudians when there are less Bermudians to pay them.
“We need to attract more people to this island, not chase them away with higher taxation.”
David Burt, the Premier, thanked the Tax Reform Commission members and said the review was about “making our tax system more fair and more balanced”.
He continued: “What I hear is that there’s one side, which is protecting the status quo, and there’s another side that wants to change things to make sure that we lower taxes for workers, lower taxes for the low income people and possibly tax those persons who may be a little bit more wealthy, whose income has never been subject to taxation.”
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