Mixed business reaction to Budget
Island businesses reacted to the 2021 Budget statement with mixed levels of optimism yesterday.
Philip Barnett, the president of Island Restaurant Group, said: “I am feeling exhausted relief from the setting of no new taxes or increases, and the continuation of current tax payroll tax relief.
IRG includes Brew, the Frog & Onion, the Pickled Onion, the Hog Penny and Barracuda Grill.
Curtis Dickinson, Minister of Finance said yesterday: “There is a fragility to local finances that cannot be further strained by increased taxes.”
Mr Barnett added: “We also look forward to gaining more clarity on what the Minister meant when he detailed payroll tax relief to troubled sectors will be continued through 31 March 2022.
“We trust and hope that it will be a continuance to the relief policy that has been in place since the first quarter of this last fiscal year.
“The restaurant division of the Bermuda Chamber of Commerce had a separate memorandum of understanding with the Minister of Finance. ”
But Mr Barnett said it would take the local restaurant industry years to recover from the Covid-19 lockdown and business restrictions.
He added: “Restaurants will have not only burnt through all their operating cash, but most if not all will have engaged in new corporate borrowing, or more likely owners’ personal savings or borrowing, to continue to fund operations and keep people employed and the doors open.”
Mr Barnett said he was grateful for the payroll tax relief, but restaurants still paid a lot in utility and import taxes, as well as day to day stock costs.
He added: “There is no tax offset that we can apply our losses to, so we will need sustained and broad ongoing relief to recapitalise over the medium term.”
The 2021/22 Budget also included a drive to expand the population.
Mr Barnett said: “More people means more economic activity, more knowhow, more diverse businesses, more for everyone.
Glen Smith, the managing director of Auto Solutions said Bermuda seemed to be going in the right direction with the introduction of a digital nomads scheme, which allowed people from overseas to work remotely from Bermuda.
He added: “We have seen the impact of that in our industry,
“We have sold cars to some of the digital nomads who are here.
“That small number that is here is helping Bermuda. It would be great if we could expand that number further.”
Mr Smith highlighted that Bermuda had an ageing population.
He said: “Bringing in more people brings down insurance costs because it spreads it the costs across younger people. That is what we need.
But he added Bermuda had a $3 billion deficit that would have to be paid off at some point.
He said: “You can’t keep kicking the can down the road.
“We are blessed that we don't have increased taxes right now but when things turn around, taxation will have to kick in.”
Mr Dickinson added that the 2015 land valuation list would remain in force for ten years, so there would be no increases in land tax and the annual rental value bands.
Buddy Rego, the president of Rego Sotheby’s International Reality welcomed the news.
He said: “It is appropriate considering the huge percentage increase we have had in recent years in property tax.
“It remains yet to be seen if land valuation levels being frozen for ten years remains a good thing or bad thing but at least it is not to be changed right now.
“What remains to be seen is what happens to the tax rate. From a real estate community perspective, affording higher tax rates on properties now or in the near term would not be welcome.”
Mr Rego said it would not be practical and could be detrimental to property ownership.
He added: “If the government acts as it has proclaimed in this realisation of this significant situation and predicament, and acts to remediate it, then I think we have something to look forward to as relates to the Budget.”
Mr Dickinson also announced legislation designed to give a zero rate of Customs duty on imported capital goods intended for the renovation of shops would be extended until 2026.
Paula Clarke, the chief executive officer of the Gibbons Company, welcomed the extension.
She said: “This encourages capital investment to keep businesses relevant and competitive in an ever changing retail environment.
“Gibbons Company will continue to upgrade current facilities and introduce new initiatives this year.”
She added retailers wanted fairness in duty paid for goods brought in for personal use.
Ms Clarke said: “Right now, shipping companies and importers pay the same duty rate as retail stores.
She added that retail stores should pay a lower rate of duty.
Ms Clarke said: “This would add income to government revenues, while at the same time improve employment opportunities for Bermudians and keep local businesses competitive.
“Every dollar spent overseas is lost to Bermuda for ever, whereas every dollar spent in Bermuda circulates many times in the local economy,.”
She added retailers were pleased that Mr Dickinson had highlighted that “there is nothing more essential to our economy than buying local”.
Ms Clarke said: “This demonstrates that the finance minister recognises the importance of encouraging Bermudians to help the economy recover by supporting local businesses.
”These are the businesses that employ local talent and expertise.”