Vastly underpaid and overtaxed
On March 4, 2015, the One Bermuda Alliance passed the Payroll Tax Amendment Act 2015. For most employees, this will mean an increase of 0.5 per cent in payroll tax, which would be split equally between employer and employee.
However, for some of our lowest paid workers, this could mean a 5.5 per cent deduction in their pay.
The OBA, opting to partially roll back the payroll tax concessions for hotels, restaurants and the retail sector, will allow “employers in these sectors to decide how much of this rollback will be transferred to employees”, said Minister of Finance Bob Richards in the House of Assembly.
The underlying intent
At the recent People's Campaign forum, Economic Impact of the 2015/16 Budget on Bermuda, held on March 17, Kristi Grayston, president of the Chamber of Commerce, made it crystal clear OBA's intention: “To be honest to you, the intent of Government — we know because we had previous meetings (with the Government) ahead of the Budget — the intent was to reinstate the employee portion of payroll tax.
“That was the intent whether they come out and say it or not — and shame on them, frankly, for not. The intention of Government was very clear — at least to the Chamber.
“The reason that we got the payroll tax concession — and we worked many, many years and very hard to get it — is because a lot of times in Bermuda, and I think we are all tired of it, but you pay and you pay and you pay until you can't pay any more and you don't have to. ”
Will employers bear this additional tax burden themselves, opt to share it with their employees, or transfer this tax on to their employees?
“We understand that governments need to collect revenue to help cover the debt; everyone has to pay their fair share” — Kristi Grayston, The Royal Gazette, February 20, 2015.
However, during the People's Campaign forum, when asked if she personally would share the payroll tax, Mrs Grayston stated: “I am not now taking home a salary, so no, I am not sharing that; that is my employees' portion of payroll tax that is being reinstated for them.”
What about other members of the Chamber?
Mrs Grayston said: “I can't speak to what my fellow members will do — I think many will share it or absorb it.”
In The Royal Gazette on February 20, 2015, some Chamber members clearly stated the following:
- “Retailers polled have stated that without this concession, they would surely have to make cutbacks that would affect staffing levels and result in further collaboration” — Paula Clarke, the chairwoman of the Chamber of Commerce retail division.
- “Restaurants in many instances have hung on during the past six dismal years purely because of payroll tax relief. Loss of relief ... will impact our sector and may put some places out of business” — Teresa Chatfield, a director of the MEF group of restaurants.
- “Tax relief is helpful because the sector has faced difficult times” — Christopher Garland, chairman of the Chamber's 80-member restaurant division
Bearing the brunt
There are 6,954 persons employed in these three industries who will be impacted by this new legislation.
The median annual wage for employees in the restaurant sector is $34,982, hotel sector ($35,614) and retail sector ($43,136). The median annual wage for Bermuda's labour force is $60,668.
One of the reasons given by Minister Bob Richards: “There are additional expenditures that Government will have to make in preparation to host the America's Cup — expenditures that have to be financed from tax revenue ... instead of being financed from additional long-term debt.” During the debate on this amendment, Mr Richards emphasised that this increase in payroll tax came only after extensive collaboration with the following stakeholders: the Chamber of Commerce, Bermuda Hotel Association, Association of Bermuda International Companies, Association of Bermuda Insurers and Reinsurers.
During the debate on payroll tax, Mr Richards referenced the recent protest against furlough days by Bermudians: “There were people in January who were unhappy about whatever — quite frankly, I am not sure what they were unhappy about — but they were unhappy and marched up and down the streets and in front of Cabinet building. Those people were unhappy.”
Perhaps Mr Richards and/or the OBA should try to understand the plight of Bermudians who are vastly underpaid and overtaxed?