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Budget will create a bridge of stability, Premier

Premier and Finance Minister Paula Cox says the National Budget of $1.08 billion and associated economic stimulus measures should create a bridge of stability to an anticipated return to economic growth in 2013.

Government added $98 million to its debt over the past two years through the payroll tax rollback in 20112012 and tax concessions to the hotel, restaurant and retail sectors and for other forms of relief.

Payroll tax concessions for the hotel, restaurant and retail sectors have been extended while Government says reducing pressure on family budgets is also part of its economic recovery plan.

Government will amend the Occupational Pension Act to allow for a voluntary suspension of employee and employer contributions for a period of one year beginning in 2012. The contribution rate of ten percent is shared equally between employers and employees.

Ms Cox says this will provide relief and stimulus to families and businesses, allowing people to spend more and businesses to invest.

Government will amend the Public Service Superannuation Act 1981 during the Budget Session to enable participants who are in financial distress to have access to a portion of their pension assets.

Government will remove a stamp duty charge of ten percent on assignments or transfers of mortgages to encourage mortgage payers to seek the best financing options available to them and to promote competitive lending rates between our local banking institutions. This exemption from the stamp duty charge will reduce the cost to customers when transferring a mortgage from one bank to another.

Sandys 360 will get a capital grant of $2 million to assist in defraying the cost of works undertaken.

The revenue estimate for 20122013 is $909.6 million, three percent lower than the original estimate for the previous year.

*The most significant decline has been in the payroll tax yield which has decreased by $38 million or 11 percent compared to the previous year. The loss of jobs in the economy is one of the factors.

* The other factor is the payroll tax concessions to the hotel, restaurant and retail sectors which have reduced the projected payroll tax yield in 20122013 by an estimated $21 million.

The yield from land tax will be improved in 20122013 by adjusting the ARV threshold that provides an exemption for seniors living in their own homes. The amount of recovered tax is estimated at $4 million.

Seniors whose properties have an ARV of less than $50,000 (an estimated market value of up to about $1 million) will continue to have full exemption from land tax. Seniors with properties with ARVs above $50,000 will now pay the assessed tax on the portion above the $50,000 threshold.

The exemption previously provided to seniors for vehicle licences will be amended to cut out abuse and will recover an estimated $3 million in vehicle licence fees.

Airport duty will be restored to a fixed rate of 25 percent but the allowance will be raised to $200 per person with effect from April 1, 2012.

The duty rate for personal importation of goods will be harmonised at all ports of entry at the fixed rate of 25 percent.

The duty on cigarettes and tobacco will be raised in April 2012 to achieve additional customs revenue of about $1 million.

The biennial adjustment of government fees will be increased by about 3 percent for most fees and the anticipated yield is an additional $45 million.

Government anticipates $10 million in receipts from sale of government property that is surplus to requirements.

There will not be an increase in bus and ferry fares and all other tax rates will remain the same as they are now through 20122013.

Government will develop other revenue streams including the possibility of a public-private partnership to generate additional $18 million per year revenue from Bermuda’s commercial airspace.

Government has initiated discussions with relevant parties to assess the feasibility of establishing a licensing regime for international fishing vessels taking fish stocks out of Bermuda’s 200 mile maritime exclusive economic zone.

Government will suspend its matching contribution to the Public Service Superannuation Fund (PSSF) and pay a portion of the debt service from the Sinking Fund. The contribution to the Sinking Fund, $30.7 million, will be made. The suspension of the matching contribution to the PSSF will enable $31 million to be redirected to policy priorities in 20122013.

During the year, Government will commission an actuarial review of the PSSF to ensure its future sustainability. The suspended matching contribution for the upcoming year will be paid into the fund in the future noting that in recent years Government has paid special contribution amounting to $87 million into the PSSF.

The statutory ceiling on Bermuda Government debt will be adjusted to $1.45 billion in 20122013.

The overall budget balance including current account and capital account outlays, debt service, Sinking Fund Contribution and revenue sharing with the City of Hamilton and the Town of St. George is a deficit of $172 million. Government proposes to finance this deficit in part by the issue of a local bond at a competitive rate of interest. This policy choice is intended to spur more economic activity in Bermuda and to stimulate local capital markets. Surplus deposits in the banking system will likely achieve higher returns by transferring to the local government bond when it is issued later in 2012.

Premier Paula Cox arrives at the House of Assembly to deliver the Budget.

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Published February 24, 2012 at 11:00 am (Updated February 24, 2012 at 11:48 am)

Budget will create a bridge of stability, Premier

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