Over the past number of months, members of the Bermuda Democratic Alliance have been meeting with members of the International Business (IB) community to get a sense of how the industry, which is Bermuda's biggest employer and driver of our economy, views Bermuda as a jurisdiction. What we have heard is nothing short of disappointing. Sadly there has been a common thread through the commentary. Summarised below are the four main points which have consistently arisen in these conversations:

Silent exodus of jobs

As I have stated on a number of occasions, there is a consistent trickle of jobs leaving Bermuda to other jurisdictions. This was reflected in the 2009 employment briefs which showed that IB employment had declined by seven percent. For anyone in international business, all you need to do is look around. The guest workers tend to disappear first and as such most Bermudians don't see the true extent of the problem – hence the "silent exodus".

What many people forget is how the loss of one guest worker's affects the rest of the economy. Take "Sven" (using the Premier's example) who is a mid-level accountant at a public accounting firm. His position is reliant upon companies requiring an audit and more importantly new companies that are being incorporated. If Sven's contract is not renewed due to lack of work and a lack of company incorporations, this means there are fewer companies in Bermuda that require an audit. This in turn means that the support staff for Sven and the companies he would have been auditing are no longer being hired – many of whom are Bermudian.

It goes further. Think of a Bermudian that owns a house with say a studio or one bedroom apartment that Sven used to rent. Suddenly that Bermudian needs to find a tenant – perhaps there is a one month wait or longer before Sven's old apartment is occupied – the Bermudian owner now needs to tighten his/her belt to cover that loss. This means perhaps less dining out, or perhaps one less shopping trip. You may think this is insignificant – but start to think of this as seven percent rather just one person and you get the picture on how this starts to affect the rest of the economy. Paula Cox is trying to alleviate the decline in the restaurant trade through payroll tax relief – a short term solution to a much deeper problem.

In another example, Human Resource (HR) departments shrink as jobs disappear and in my experience HR staff are mostly, if not all, Bermudians. Information Technology (IT) is also finding its way back onshore. Therefore, jobs which are usually almost fully staffed by Bermudians are disappearing in favour of IT being handled outside of Bermuda in places such as Canada and India.

The point I am making is this – we cannot be fooled into thinking that silent job losses do not affect all Bermudians, even if Bermudians' jobs are seemingly protected by the Department of Immigration. Whilst it is right to protect the Bermudian job market, the loss of guest workers to the ranks of unemployed also has a serious and detrimental effect on the economy. Eventually, the Department of Immigration will not be able to protect us Bermudians and we too will be cut from the work force. It is already happening.

Complexity taxes

Why is there silent job loss? Some of it has to do with US based parent companies trying to consolidate and save in tough economic times, but in other cases it has been a direct result of the increase cost of doing business in Bermuda through the rise in complexity tax. This turn of phrase was an interesting one. This refers to taxes such as payroll tax and increased health insurance rates and was the biggest issue for IB. In many cases IB pays both the employee and employer contributions, so in real terms this means a very significant rise in costs – so to save money positions are "consolidated" and our keen competitors are more closely examined. Even jurisdictions seen as more expensive such as Switzerland are seeing the benefit of Bermuda companies relocating. The effect of job consolidation is silent job loss (see above).

The increases in complexity taxes also has a detrimental impact on the size and frequency of charitable donations made and scholarships offered by IB – this at a time when more people in our community are relying on charitable organisations to get by. Ask the Salvation Army and the Centre for Philanthropy. They will confirm this.

Remember IB does not owe anything to Bermuda – rather it is the shareholders of IB that will win the day. Increased taxes have a greater impact on earnings. The simple fact is this – if business is more profitable elsewhere then elsewhere IB shall go. Remember 53 percent of people under 25 are unemployed. This is a serious issue.

Lack of consultation on payroll tax

We were told by a number of members of IB that the rise in payroll tax came as a shock, despite assurances allegedly made to IB by Government that any changes to the so called complexity taxes would be shared with IB prior to the Budget. Some of the top IB members we spoke with felt that IB had been betrayed and that there now existed a lack of trust between IB and Government. This does not bode well for Bermuda when the very hand that feeds us feels like it has been bitten. Trust is a key component of maintaining a good working relationship between key executives and government. Once it is gone it is next to impossible to claw back.

Crime

IB expressed concern about crime – but more how it would affect their ability in terms of recruiting executives. IB said that crime would not drive them out of Bermuda, but there was some expression that view would change if shootings started to affect their executives.

Conclusion

The foregoing is a snapshot of what we are hearing, but is demonstrative of what the IB community has been saying for some time. The message is simple. Bermuda is not as competitive as Bermuda thinks or as the Bermuda Government touts. Even very small rises in complexity taxes are potentially catastrophic. Recommendations for improvement, business leaders say, lay in the Bermuda First Report, with a number of members of IB commenting that they were disappointed at the lack of progress on its recommendations. IB said they were still largely committed to Bermuda, but trust needed to be rebuilt following the payroll tax debacle. There needs to be a way to encourage retention of talent on the island and a way needs to be found to reduce the cost burden being faced by IB.

In short, there are solutions. However, in our view this is a shot across the bow of the Bermuda Government. It is not scaremongering. Just ask Terry Lister who said: "… the Bermuda economy is troubled. We have seen some companies leave our shores and others reduce staffing. These moves hurt the Bermudian people, the Bermuda economy, and the national psyche."

We are on a metaphorical knife edge. There are numerous other very competitive jurisdictions out there just itching to take a large piece of the IB pie from us. If there are further slips, we will get cut. It is time for all of us to wake up. All is not well.

Look at the plans the BDA has put forward for change – it is time for different thinking. It is time for real economic empowerment. It is truly time for change that will not come by shuffling around the leadership of the current administration. It is time to give others a chance.

Michael Fahy is chairman and finance spokesman of the Bermuda Democratic Alliance and a lawyer in international business.