Burt planning to relax 60:40 rule
A relaxation of the business ownership 60:40 rule to boost investment by permanent resident's certificate holders was signalled yesterday by David Burt.
The Premier, who also holds the position of Minister of Finance, said too much money earned on the island ended up overseas, and the Government wanted to see more of it staying in the local economy.
He added changes were needed to stimulate growth and the Government was prepared to “touch some sacred cows” to achieve its goals.
Mr Burt said: “The challenge that we have in Bermuda is that we have a lot of money coming in and, unfortunately, a lot of that money leaves.
“The easiest way to tackle that problem of getting more money circulating in our economy is figuring out how to keep more of the money that's earned here inside our economy.
“That means we have to create more avenues for investment inside the economy, but the truth is that not all of that investment is going to come from people who have Bermuda status.
“And so there will be revisions to the 60:40 rule because it is an inhibitor to keeping more money in the Bermuda economy.”
Mr Burt was speaking at a breakfast event hosted by the Bermuda branch of the Alternative Investment Managers Association at the Hamilton Princess Hotel & Beach Club.
He said PRCs had the right to live and work in Bermuda, but their opportunities to invest were restricted.
The 60:40 rule puts a limit on foreign ownership of most Bermudian businesses to ensure they remain under island control.
Exceptions include exempt companies and, under an amendment to the Companies Act made in 2012, publicly traded companies in “prescribed industries”, which can apply for 60:40 rule relief.
Asked for further comment in a question-and-answer session, Mr Burt said he did not want to get into specifics before the Budget statement, which he will unveil on February 16.
He added: “The broader general sense is that we need more economic activity in Bermuda.
“I've had meetings with the Financial Policy Council. One of the statistics that came out was that of all of the money earned in Bermuda, between $3 billion and $8 billion over the last ten years has left Bermuda's economy.”
Mr Burt said retention of some of that money in the domestic economy was “low-hanging fruit” that could help to address the island's problems.
He added: “One of the inhibitors to that money staying here is that some people who earn money in Bermuda cannot fully invest in Bermuda and that is the problem we're trying to solve.”
Mr Burt made clear there would be strings attached to any changes to the 60-40 rule to ensure Bermudians benefited from extra investment.
He said: “When we structure policies to touch some of those sacred cows, we will structure them to ensure that the growth that we expect to result will flow to the entire economy and not just to the ‘haves'.”
Mr Burt added Bermuda could not be “a place where people can set up and make money, while Bermudians were stuck on the side looking at it”, and that local involvement was important.
He said: “You can own 100 per cent of a $50,000 business or 40 per cent of a million-dollar business — clearly most people would prefer the latter.
“So it's about structuring it, so that any changes require local participation of those people who have been left behind, so they not only get additional wealth creation, but also exposure to owning, running and being part of a business.”
A member of the audience proposed that greater opportunities to obtain Bermuda status would encourage job-creating entrepreneurs to come to the island.
Mr Burt replied that a bipartisan committee on immigration reform was examining proposals and added that the PLP's opposition to “granting status across the board” was well known.
He said: “I don't believe that people come to places to get citizenship. I think they go to places where they can most effectively make money.
“We have to make sure Bermuda is the most attractive place to domicile and to make money.”
Asked about plans for a fairer distribution of wealth, he said more would be revealed in next month's Budget statement.
Mr Burt added: “Bermuda is a very unequal society, largely based on race. But to say that it's fully based on race is not right.
“Clearly it's an issue of education, clearly it's an issue of training and retraining. So when we talk about making sure wealth is more evenly spread, it's about making the investments required to fix those long-term issues.
“In some of the boardrooms I speak in, I challenge people to knock on some of the doors I knock on and see the poverty that exists in Bermuda.
“It is real and the long-term challenge is how we address that.”