Bermuda has long positioned itself on the global stage as a sophisticated, distinguished island, ideally structured as a premier domicile for international business.

Its appeal is driven not only by minimal or non-existent taxes but also by its proximity to major financial hubs, its climate, beaches, relaxed lifestyle, and welcoming residents. These factors truly make Bermuda one of the best places in the world.

Recently, unsettling news (in my view) emerged from the Bermuda Chamber of Commerce Budget Breakfast regarding the potential introduction of a personal income tax. This has prompted me to focus today’s article on the topic of taxes, specifically personal income tax.

First, let's consider why taxes were originally created in modern times, using Britain as an example.

Britain's first income tax, introduced in January 1799 by Prime Minister William Pitt, was a temporary progressive tax aimed at funding the Napoleonic Wars. It charged 10 per cent on incomes over £200, with scaled rates for incomes between £60 and £200. The tax was abolished in 1816 after the war ended, but it was reintroduced in 1842 by Sir Robert Peel and eventually became a permanent feature of the UK tax system (Carter, 2021).

Today, governments view taxes as the life blood for generating revenue to fund public infrastructure such as roads and bridges and essential services like healthcare and education, as well as military expenditures.

Taxes are also used to redistribute wealth and manage the economy by encouraging or discouraging certain behaviours, such as taxing tobacco or alcohol (Limberg & Seelkopf, 2022).

While taxes are often presented as a means to foster civic solidarity, they primarily serve as a tool for government control over individuals. Support for taxation mainly comes from two sources: the Government, which collects and spends the funds, and auditing firms, which evaluate governmental expenditure.

From my perspective — and I believe a majority in Bermuda would agree — introducing a personal income tax in Bermuda poses a profound strategic risk that could threaten the island’s economic foundation and social cohesion.

For decades, Bermuda’s status as a zero-income tax jurisdiction has been its primary competitive advantage, attracting high-net-worth individuals, multinational corporations, and global talent.

This position has fuelled a robust economy driven by international business, reinsurance, and tourism, which generates substantial public revenue through indirect taxes and fees.

Abandoning this model would signal to global investors that Bermuda is relinquishing its core appeal. Wealthy individuals and executives who contribute significantly through high-value employment and property investments will eventually relocate to competing low-tax jurisdictions such as the Cayman Islands, Dubai, or Singapore.

This exodus will trigger capital flight and a sharp decline in foreign direct investment, fundamentally weakening the industries that Bermuda depends on.

Those who were here in 2008 remember the introduction of term limits, which came at the height of the global recession.

International businesses lobbied the Government for six years over its undue influence on hiring practices which hampered their ability to recruit effectively. The fallout?

Jobs vanished for locals and expatriates alike, sparking a major expatriate exodus as companies cut positions and redomiciled them to more welcoming jurisdictions.

From my perspective, this is a textbook case of “biting the hand that feeds you”. It took Bermuda years to recover, and the policy was among the first scrapped when the Government changed in 2012.

Now back to personal income taxes, the Bermuda Government is already dependent on volatile revenue sources like stamp duties, risks creating an unreliable, underfunded budget if it relies heavily on personal income tax receipts.

If introduced, it’s likely that the Government would announce the abolition of payroll taxes and their replacement with a personal income tax. Initially, high earners might engage in aggressive tax planning, but many will likely emigrate to zero- or low-tax countries, prompting repeated hikes in personal income tax rates on those remaining.

This would create political resentment and economic strain. The middle class, already grappling with a high cost of living, will suffer most, as increased taxes would reduce disposable income and dampen consumer spending.

The social consequences are equally clear. A personal income tax would shift the tax burden from tourists and multinational corporations who currently contribute through indirect taxes and fees.

This would disproportionately impact families and retirees. Additionally, implementing such a system would require a costly expansion of the civil service for enforcement and compliance, increasing public-sector expenditure and the risk of corruption.

Intrusive reporting requirements would be necessary, eroding the privacy and discretion that have long been central to Bermuda’s appeal in the global financial services sector.

In an era of digital nomadism and remote work, preserving Bermuda’s tax-free status is more critical than ever. It sustains the island’s prominence in reinsurance and supports thousands of local jobs.

Compromising this advantage could provoke competitive retaliation from peer jurisdictions, jeopardise Bermuda’s OECD whitelist status, and impede access to international markets.

Ultimately, adopting a personal income tax is a short-sighted government gamble that promises fiscal stability but would likely result in economic contraction, social division, and diminished Bermuda’s global standing essentially, the final blow to its economic model.

Maintaining the zero-tax system while pursuing prudent and transparent fiscal reforms remains the most sustainable path to long-term prosperity. The Government must understand the far-reaching ramifications of its policymaking.

References

Carter, C. (2021) 9 January 1799: income tax introduced to Britain. Money Week. Available From: https://moneyweek.com/372129/9-january-1799-income-tax-introduced-to-britain [Accessed 28 February 2026].

Limberg, J., & Seelkopf, L. (2022). The historical origins of wealth taxation. Journal of European Public Policy, 29(5), 670—688. https://doi.org/10.1080/13501763.2021.1992486 [Accessed 28 February 2026]

• Carla Seely has 25 years of experience in the international financial services, wealth management, and insurance industries. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI qualification through the Chartered Institute for Securities and Investments (UK), the qualified associate financial planner (QAFP) designation through FP Canada, and the associate in insurance (AINS) designation through The Institutes. She also completed a Master’s Degree in Business and Management through University of Essex

• For further inquiries or suggested topics, e-mail justaskcarla@outlook.com