The cost of living and tax burden on the average Bermudian family is significant. It is about to get even worse, due to the government budget shortfall. Taxes are an all too common method for governments to raise money to run the business of the government. Bermuda still has sceptics in the global press regarding our supposed low-tax regime status.

Anyone making such comments does not understand the cost of living on a small island. We should invite them to review our monthly payroll checks, now net of 5.75 percent payroll tax, anywhere from a 10-25 percent increase in health care costs, or have them stand in line at Customs to pay their share of consumption tax, or open a monthly utility bill more than one third of which is a surcharge, or stand in line to purchase groceries, or gas to get to work, or purchase a home, all prices reflecting Government customs and tax duty.

The Bermudian family in our chart with gross wages of $50,000 each (that's $25 per hour on a 2,000-hour year) spends more than 18 percent of their disposable income on government taxes and surcharges.

It could easily be more, since the chart is based on fairly conservative estimates. Every time you trip gleefully abroad, both government and the banks take a currency conversion fee; every time you register your car/bike, or have a document prepared, or convey a contract, there is a fee.

Every time you shop locally you are absorbing in the price of the goods, the tariffs, fees and shipping that the vendor has no choice but to pay for importation.

Owning a mortgage liability carries an interest fee in the spread difference between deposit rate and the mortgage rate, a spread locally that is higher than competitive loan rates in other jurisdictions.

How do we compare to other jurisdictions in the amount of tax assessed per individual (adult)?

The United States, UK, European countries and Canada have pretty onerous tax assessments, generally, tax progressive in nature. Progressive taxation is computed on increments of earnings, i.e. the first $12,000 is taxed at 10 percent, the next increment above $12,000 to $30,000 is taxed at 15 percent, the next tier of earnings above $30,000 is taxed at 25 percent, and so forth.

Tiering income thresholds for taxation does mitigate the effects of a tax on lower income wage earners; the theory being if you earn more you should pay more.

Flat versus Progressive Taxes

Most of the taxes assessed in Bermuda are not progressive, although voluntary conveyance of property during life or Estate Stamp Duty at death are calculated on a sliding scale.

When taxes are not progressive, they are called flat taxes; those in the more modest wage earning brackets tend to pay a higher proportion of their income in taxes and fees.

Sales taxes and VAT-type taxes are considered flat taxes. They may be focused specifically on luxury goods as opposed to necessities such as groceries.

The philosophy behind a sales tax is that those into excess consumption will buy more expensive goods because they can afford them. In Bermuda, the only way to minimise a flat tax burden is to purchase less, pretty difficult when trying to feed, clothe, and house a growing family.

As noted in the Bermuda chart, there are a number of taxes assessed at various rates, along with surcharges added to some items. Wage earners saw their payroll tax rise this year, and the cost of currency conversions doubled.

Everything that walks, flies, sails, motors, rows, swims, and parachutes into Bermuda, carrying goods in excess of the duty free allowance is assigned a tariff charge upon arrival. Her Majesty's Bermuda Customs has a list of tariff assessments on line.

As noted above, The First Schedule could not be reviewed for updates in time for publication. It is a massive document, detailing every conceivable item possible, including human hair. Yep, if you want that extra tilt to your 'do', you'll pay duty on it.

How do we translate these various tariffs, duties, and taxes to a per-individual charge?

Not an easy task, and ripe for criticism and speculation. I welcome any comments from readers on this subject. We start by making some assumptions, and you should not expect these to be accurate to the penny.

Further, Bermuda Resident Family Chart numbers were based upon estimated wholesale costs of various average household budgetary items. Vehicle and conveyancing tax were based upon average holding life of the car or bike and so on. At the end of the exercise, our average family spends approximately 18-20 percent of their gross income on duty, taxes and other fees.

When you add in the incremental cost of financing here (conservative estimate two to three percent higher) — as opposed to the mortgage rates in the US — the cost of living jumps to close to 25 percent.

There will be those who may differ with these assumptions and computations, but the conclusion remains the same. Bermudian residents do pay a significant portion of their incomes in taxes and fees. The rates are not progressive. Those with modest incomes have a much larger 'bite' taken out of their earnings every year. Taxes and fees are cash taken from your purse and wallet before you even have the right to see it. Do you know if government is handling and caring for your money appropriately and respectfully?

Do you care? You should — 20 percent of $100,000 is an enormous sum you are giving up each year. It should be used carefully and conservatively.

I am looking for families to anonymously assist me in refining this chart (to reflect cost changes each year) with your own household cost track record.

If you are interested, please contact me confidentially.

In research for this article to obtain current custom duty rates, I first went to www.customs.gov.bm for the complete Customs Tariff Act 1970, including the First Schedule which details the dutiable rates for all imports.

The Bermuda customs website stated that the First Schedule was a large file and referred me to www.bermudalaws.bm where you guessed it, I was referred back to the Bermuda customs website.

Please note that tariff rates may not be entirely accurate, due to inability to access the First Schedule on either website.

Martha Harris Myron, CPA, CFP (US) TEP (UK) JP- Bermuda is an independent fee-only cross border planning specialist in investment, tax, estate, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 296 3528 at Patterson Partners Ltd.

The article expresses the opinion of the author alone, and not necessarily that of the Royal Gazette. Under no circumstances is this advice to be taken as a recommendation to buy or sell investment products or as a promotion for financial plans. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.