Dear Sir,

As with every administration, the past nine years under this PLP government have been punctuated with much fiscal upheaval, some self-inflicted and some beyond its control.

The main economic challenges for this administration included the hundreds of millions of dollars absorbing the legal costs of the failed luxury Morgan’s Point development, the costs of the failed and unsustainable Grand Atlantic housing development/Bermudiana Beach Resort and the almost two years of economic downturn/social implications from a once-in-a-lifetime pandemic.

Also, healthcare costs have soared, the uninsured demographic is larger than ever, and most recently, this government has finally admitted to what will be an ongoing future taxpayer cost of remedying the ramifications of the egregious design flaw in our Acute Care Hospital, which was built with insufficient capacity even for normal, daily patient flow levels.

Today, there is hope in the form of a new source of government revenue, being brought to us by none other than our international business community. It is the corporate income tax, which is estimated to increase future government annual revenues by 40 per cent on average. That is one heck of a government raise. For 2026-27, the Government projects corporate income tax revenue of $753 million.

CIT — The collection process

The newly established Corporate Income Tax Agency (CITA) is the official authority responsible for administering and enforcing corporate income tax in Bermuda. Members of the CITA possess specialised expertise in corporate tax, insurance sector strategy and global tax administration.

The first year of CIT in Bermuda officially took effect for tax years beginning on or after January 1, 2025. Companies will make their estimated tax instalments/payments directly into the CITA Tax Reserve Fund throughout their fiscal year. Tax credit or refund claims are filed alongside their end-of-year CIT return.

This tax fund is overseen by the Ministry of Finance and the CITA, and its purpose is to hold corporate income tax payments separate from the Consolidated Fund and regulate the processing of all authorised tax refunds and credits, ensuring transparent management of the jurisdiction’s tax framework.

All CIT revenues collected by the agency are initially deposited here to ensure transparency and proper structural operation before they are utilised or transferred. The fund must maintain a required monthly minimum balance and any excess is transferred directly to the general Consolidated Fund for other government expenditures.

Our financial advisers’ caution

The 2025 report of the Fiscal Responsibility Panel (FRP) made extensive recommendations for the management of all CIT revenues, many of which will be adopted by the Government, including funding contributions to:

1, a Stabilisation Fund to provide a financial cushion during periods of economic stress

2, an annual contribution of $200 million to the existing Debt Sinking fund

3, the deficit rule: the everyday, current budget must remain in balance or surplus without relying on any CIT revenues

However, the FRP recommended treating all CIT receipts as volatile windfalls and it strongly urged keeping these funds completely distinct from other revenues and that CIT revenues should be used solely for debt repayment (and interest payments), the Sinking Fund, a Stabilisation Fund, Sovereign Wealth Fund and carefully prioritised and timed capital projects.

The Finance Minister disagreed with this, saying that “it does not accord with the policy view of the Government of Bermuda”.

The Government’s approach is to set aside at least 70 per cent of the revenues for debt reduction and then use the remaining CIT funds for immediate public investment. This includes funding for the rollout of universal healthcare reforms, cost-of-living reduction measures, infrastructure upgrades and permanently strengthening public services.

The FRP strongly cautioned against utilising the new CIT revenues to finance tax cuts or to fund new spending programmes and it emphasised that until CIT revenue streams are fully established and matured, the very real risk of corporate company departures warrants a highly conservative approach. CIT revenues will fluctuate depending on profitability levels of the international business sector, which will be affected by many factors, including economic cycles, refund activity, loss offset provisions, profit shifting and changes in global tax policies.

Debt repayment begins

The Government has pledged repayment in full of $605 million in senior notes when they mature in January 2027 using the CIT revenues. This marks the single largest debt repayment in the island's history, saving taxpayers $25 million annually in interest costs. This decision will reduce gross debt by 18 per cent from $3.29 billion to $2.69 billion, which is a welcome first step by this administration, although there is not a clear timeline for dedicated additional debt repayment going forward.

This paragraph from the December 2025 FRP report reveals the gravity of government financial decision-making going forward:

“The CIT provides a rare opportunity to lock in gains, reduce vulnerabilities and build institutions capable of withstanding future shocks. With such a framework, the island could eliminate net debt within a decade and create a durable foundation for intergenerational equity; a worthy legacy for the next generation of Bermudians.

“Conversely, if discipline weakens and CIT receipts are treated as a permanent entitlement, the opportunity could quickly be lost, business confidence could evaporate, and the island would be left with the legacy of a worse underlying fiscal position with continued reliance on international debt markets to finance unsustainable spending.”

This is a pivotal time in our history and this next, yet-to-be-written chapter in the book of Bermuda’s economy will be an interesting read.

BEVERLEY CONNELL

Pembroke