A means to kill two birds with one stone?
We have been down this road before, Mr Editor, with lots of forks along the way. Discussion and dialogue continues, as it should, on what can be done to turn around our economy. What can also be done to improve government finances is also a continuing focus of conversations. The two issues are inextricably linked, of course.
It was former UBP Cabinet minister Quinton Edness who got us all thinking again when he recently suggested that the Government ought to be looking at further cuts rather than drawing down on a $200 million loan facility obtained from Butterfield Bank. He also suggested a further 10 per cent cut in salaries, but not necessarily across the board: lower-income earners would be exempt.
The former senior minister made the point that adding to the debt — now at $2.185 billion and counting — could be disastrous, never mind unsustainable, which is what the finance minister said it was before he got the added lift. Ultimately, the taxpayer is going to have to pay — one way or the other, now or later. True that, QE.
We have already seen the difficulties and the challenges that the Government has encountered since coming to office in trying on cuts and salary reductions. The farther away from the last election, and the closer to the next, the harder it is likely to get.
There is bound to be pushback and no one should be surprised about that. Very few of us are prepared to give of what we do have, period; never mind when times are tougher and money is tight. It's a perfectly natural reaction. Any give-and-take should come from someone else who can afford to give. We all know how it goes: him not me.
It's much the same way when it comes to taxation.
Tax!? I dare mention the subject, yes. QE's reported recommendations also brought to mind another more dramatic proposal made some time ago by a leading light in Bermuda's insurance industry, John Charman. Who among us can forget the headline: “Charman: Corporate tax would benefit Bermuda”? It was less than six months ago. It was stunning news at the time, but worth recalling.
There was some merit to what was rightly described then as “a trial balloon the size of the Hindenburg”.
I recall the reasons Mr Charman reportedly advanced. They are as relevant today as they were then:
• Transformational change is required to rebalance our global financial status and our reputation
• The adoption of a corporate tax could help to “disarm” the continuous threats from the OECD and other critics
• Some sort of corporate tax might go some way to meeting many of the external issues and challenges that Bermuda is facing “and enable us to be on a more level platform with our heavyweight international critics”.
Of course, he cautioned that any move to introduce a corporate tax should be “phased in” (he mentioned a 25-year period) and only after consultation with the business community.
Mr Charman also recommended that the tax be introduced as “part of a wider modernisation of the economy, including a review of the entire tax system, to counterbalance the impact of the new tax”.
Comprehensive. Transformational. Modern. Sounds about right to me. In fact, the very appeal was that it looked like Mr Charman had come up with a means to kill two birds with the one stone.
Now it may be that the called-for consultation has already begun. The next day of reckoning, the 2016 Budget, is six months off.
But what we do know is that our offshore/onshore critics remain relentless and not just in their criticism, but in their actions to make economic life more difficult for those jurisdictions they regard as tax havens. Whether we like it or not, Bermuda remains in their sights.
We know their motivation. It isn't just to shut us down. They are going after what they believe should be their fair share on taxation (not to mention the business). Spending cuts have led to little tolerance for tax avoidance and they are not just going after dots on the map. The EU recently announced plans to pursue its own member states. The pressure mounts. Neither can we expect it to dissipate in today's global economic conditions.
This is the challenge we face.
While we did have a Sage Commission, we never got a similar blue-riband committee on revenue and how to stimulate the economy — not that much of what Sage proposed was adopted in any event.
There is this hope that the economy will improve and that the so-called green shoots will help to lead to a continued increase in government revenue, which is good news providing the Government can at least hold the line on expenditure. A big proviso, for sure. (Time to legislate balanced budgets as a requirement at law?)
But, so far, growing the economy is looking like a long and hard slog — steady and sure, maybe, but still it looks very much like kind of trickle down and trickle out. We stay tuned as to whether this will work for all — and fast enough.
A quick and funny P.S., Mr Editor, on trickle-down economics: Liberal leader Justin Trudeau has been relentless in his criticism of the governing Conservatives for trying to fix the Canadian economy “from the top down”.
Instead, he said the Liberals would do it from “the heart outwards”. Perplexed? Don't be.
According to columnist Robyn Urback of the National Post, young Trudeau was simply espousing “ventricle-down economics”. Nice one.