Duty harmonisation 'will harm small businesses', couriers
The shipping industry and consumers alike will be hit hard by Government's decision to charge 25 percent duty on all goods imported for personal use, according to three of the Island's couriers.
They criticised Premier Paula Cox's announcement in her Budget statement yesterday that the duty rate would be “harmonised at all ports of entry” to 25 percent, while Bermuda Chamber of Commerce welcomed the move.
The change is expected to mean a leap in the duty rate payable on items imported from abroad such as clothing, shoes, cameras and vitamins, from April 1.
The rate for clothing is currently 6.5 percent, shoes are ten percent, cameras are 8.5 percent and vitamins are 15 percent.
The rate should decrease for televisions, radios and car parts, which are currently charged at 33.5 percent.
Steve Thomson, president of Mailboxes, said: “This is an extremely unpopular move by the Government to increase duty for personal items, specifically because the people of Bermuda are going to have their choice limited now.
“This will push the cost of items up. For an individual who wants to buy a pair of shoes or pair of pants where they couldn't find [them] here, they are the ones being penalised and punished.”
He added: “The object is to force consumers into the local shops. Now that they don't have competition, it will give them free reign to increase their prices.”
Chris Heslop, general manager of FedEx, said the increase wouldn't be huge for the majority of imports, such as toys, computers, software, MP3 players and devices like iPads, which are currently charged at 22.25 percent.
But he added: “For certain items currently in the 6.5 percent and 8.5 percent range, it is a significant increase, which I think is the wrong thing to do to stimulate the economy during the economic downturn.
“Unfortunately, importers are at a further disadvantage to people shopping overseas and bringing it in with them via the airport, as we also have to pay the 1.25 percent wharfage tax and package tax.
“I don't think that this increase will have any benefit on retailers and it is just another way for the Premier to raise taxes under the pretence of saving jobs.”
Tom Nelmes, CEO of BEST Shipping, said: “I don't think the Government has had the right level of consultancy. I appreciate that working in Government is not easy but they haven't consulted all the stakeholders, including our industry and that's a shame.”
He added that small businesses would also feel the pinch. “I think this will irreparably harm the small business in Bermuda in ways they haven't thought through.”
Couriers have been fighting against the potential for a duty hike since the Premier's pre-Budget statement came out in December. A petition against the proposal attracted more than 3,000 signatures and was delivered to Finance Minister Ms Cox in January.
The Chamber of Commerce said yesterday the 25 percent harmonisation was expected and many retailers would be “cautiously optimistic” about it.
Peter Everson, head of the Chamber's Economics Advisory Committee, said: “This decision simply corrects a long-standing anomaly and brings Bermuda into line with internationally accepted tax practices.”
Government confirmed yesterday that the duty increase would take effect on April 1, with legislation needing to be passed first. It said goods arriving here on April 1 and after would attract the new rate.
In November, the duty rate for people bringing in items at the airport rose temporarily to 35 percent and the duty-free allowance was set at $100 per household.
Yesterday's Budget returned the airport rate to 25 percent and increased the duty-free allowance to $200 per person, from April 1.
Duty will rise on cigarettes and tobacco that day, with Ms Cox explaining the increase would yield Government additional customs revenue of about $1 million.
The rate will go up per cigarette by two cents (from 18 cents to 20 cents), meaning consumers should expect to pay an extra 40 cents on a pack of 20.
Ms Cox said apart from changes to land tax and car licences for seniors (see separate story) most other tax rates would not change in 2012/13.
She added: “The biennial adjustment of government fees will be increased by about three percent for most fees and the anticipated yield is an additional $4 to 5 million.
“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 2012/13.”
Government confirmed yesterday that the duty increase would take effect on April 1, with legislation needing to be passed first. It said goods arriving here on April 1 and after would attract the new rate and all items currently duty free would remain duty free, including books.