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Bermuda is broke: can we fix it?

Bermuda’s economy was grossly flawed before the Covid-19 pandemic and, one year later, still reeling with the continued deadly toll that this disease has had to life and work, we are nothing short of broke.

The Government cannot sustain further borrowing to pay businesses and families financially affected by lockdowns because we already owe $3 billion, and eventually institutions will stop lending to us. If the country wishes to reverse its financial fortune, it is clear the solution will have to come from drastic internal change and not external saviours.

Planning to prevent apocalyptic financial ruin is imperative and the most realistic, albeit controversial, option is to introduce a 3 per cent to 5 per cent tax on newly incorporated international businesses while maintaining and honouring the 0 per cent tax assurance certificate issued to international businesses already listed on the Bermuda Register of Companies.

Why is taxation of international business necessary? Because, simply put, Bermuda’s people need the money more than international corporations.

Look around: the Centre Against Abuse has no safe house, the Sunshine League home that cared for orphans no longer is available and Bermuda has run out of senior homes. Additionally, addiction services have dwindled and there is no properly functioning halfway house for inmates.

In the past several years, both the former and present governments have not been able to provide meaningful financial support to charities and sports clubs owing to national debt, and this pandemic will come close to impairing these important pillars in our society. Furthermore, we have an unhealthy reliance on the private sector to fund social programmes.

In 2017, 23 per cent of Bermudians were living at the poverty level. Considering the past year and the necessary lockdowns arising from the pandemic, it is logical to conclude that this number has increased exponentially. It is sobering to imagine, but it is likely that 30 per cent of Bermuda’s population may be living at the poverty level with no access to affordable housing.

Bermuda is broke, but we can fix it.

Implementing a corporate tax on the dividends declared by international business would go a long way towards helping us to sustain our debt repayments, and to support social services, infrastructure, community, and sports and charity organisations. Shareholders of local companies pay tax on dividends; so should shareholders of international business.

Bermudians are required payroll tax, land tax, capital gains tax on house sales, and revenue of commercial buildings’ rents is taxed. Everything we buy in Bermuda has already been taxed 25 per cent, except food.

International business is not taxed; it pays an annual government fee and additional fees when it makes changes to capital, applies for licences and permits, as well as the issuance of certificates, etc. Although international business contributes 80 per cent to our gross domestic product annually, the fees generated do not sustain the running of Bermuda’s infrastructure or social services. If these same companies operated on shore in one of the 37 countries that comprise the Organisation for Economic Co-operation and Development, the average tax rate would be 21.8 per cent.

It is morally wrong, it is intellectually wrong for law firms, banks, corporate service providers, financial service businesses and certain Members of Parliament to nurture the bogeyman belief that any potential international business would run from Bermuda if we implement a 3 per cent to 5 per cent tax on declared dividends.

The European Union and OECD claim we are a tax haven. This can be challenged if we implement a responsible corporate tax on new business from international business and honour the existing tax assurance certificates given to current corporations.

In the face of the OECD co-ordinating talks with 140 countries to implement a global minimum tax rate, and with the prospects of President Joe Biden’s proposal to substantially increase the US corporate tax rate from 21 per cent, now is the time for our parliamentarians to take a leadership role in changing the course of Bermuda’s economic winds.

This is my third article over several years regarding this subject. However, now is the perfect time for a grassroots movement to form, or for past movements to resurrect, and lobby the Government to implement a corporate tax on new international business. It is now time for churches, unions and charities collectively to call for a reformation of Bermuda’s economic model, which in its present form no longer serves in the best interest of the overall population of her people.

In so doing, may we also reflect on the tourism industry, which from the 1960s through the mid-1990s grew Bermuda’s middle class. In 1976, tourism brought in 80 per cent of gross domestic product, and a worker did not have to be a college graduate. This industry grew Bermuda’s middle class, enabled it to buy houses, and paid for its children’s university degrees. Tourism during this time in our history helped families to step out of poverty.

Now the tourism industry’s pulse is barely beating and is calling out for resuscitation. Fortunately, there is potential after the reopening of the airport for vaccinated travellers. However, this industry will still require support from the Government with functioning public transport, cultural sights and recreation. The Government must place itself in a financial position to meet these needs or miss out on an opportunity to diversify and restimulate our stalemate economy.

Cheryl Pooley is a social commentator and three-times former parliamentary candidate

Let us responsibly tax new international business so that Bermuda can sustain its debt repayments, provide its people with robust social services to meet these challenging times, and properly manage infrastructures in order to be a successful and growing economy once again.

Cheryl Pooley is a social commentator and three-times former parliamentary candidate

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Published May 18, 2021 at 8:00 am (Updated May 17, 2021 at 5:19 pm)

Bermuda is broke: can we fix it?

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