Most employees get payroll tax cut in Budget
A sweeping overhaul of workers’ taxes for the coming fiscal year was “absolutely” welcome news for Bermuda’s lower earners, a charity head declared.
The remarks came after David Burt, the Premier, told MPs that a simplification of the island’s “regrettably complex” taxation structure lay farther down the road — with policies under review because of the looming global minimum tax.
But in a major reform of the present four-tier tax payment system, Bermuda will acquire a fifth band as of April 1 targeting earners of between $500,000 and $1 million.
Sandy DeSilva, the director of the Family Centre, reacted positively to Mr Burt telling MPs that “any individual making $132,000 or less per year will pay less in payroll taxes last year”.
The Premier said the relief would cover 86 per cent of the island’s workers.
Exempt businesses will see no increase in tax liability.
Dr DeSilva said she would reserve the bulk of her comment until after reviewing the Budget 2023-24 in detail.
But she said that citing a threshold salary of $132,000 was an indicator of the high costs residents faced in Bermuda.
She added: “With that amount, I feel like anybody listening from another country would think, are you crazy?
“But if you have a mortgage, buy groceries once a week and live a fairly normal standard of life, it’s healthy but that could still not be enough.”
Dr DeSilva commended the Budget’s relief for “everyday people”, adding: “Hopefully the outcome will be that the more we grow the economy, the more that will reduce our cost of living.”
In an extra sweetener, Mr Burt pledged that self-employed farmers and fishermen would see payroll tax chopped from 1.75 per cent to zero.
Hotels and restaurants with an annual payroll of $350,000 or more will pay 17 per cent less in tax.
Education, sport and scientific institutions will see their payroll tax rate move from 1.75 per cent to 1 per cent, reducing their payroll tax liability by 43 per cent.
Otherwise, the Premier said, businesses with an annual payroll of up to $200,000 will see payroll tax liability drop 43 per cent, while the $200,000 to $350,000 will get a 29 per cent cut.
Those in the $350,000 to $500,000 category will drop 19 per cent, and it will fall 17 per cent in the $500,000 to $1 million band.
Those with an annual payroll of $1 million or more will see their payroll tax drop 2 per cent.
On the employee side, earners of $48,000 annually or less will get a rate drop from 1.5 per cent to 0.5 per cent.
The next tax band, up to $96,000, is set at 9.25 per cent.
The third tax band, of $96,000 to $200,000 will be set at 10 per cent, while earners of $200,000 to $500,000 get taxed at 11.5 per cent.
The new fifth category, $500,000 to $1 million, comes with an employee tax rate of 12.5 per cent.
Mr Burt told the House that the fifth tax band would ensure that “increases to higher brackets of taxation are not as dramatic as proposed in the Pre-Budget Report”.
He emphasised that marginal rates meant that all earners paid the same rate for income in a band.
“So, someone making $250,000 will pay 0.5 per cent on their first $48,000 of income, just as someone making only $48,000,” he said.
“Alternatively, someone making $96,000 does not pay 9.25 per cent on all of their income — they pay 0.5 per cent on the first $48,000, and 9.25 per cent on the amount between $48,000 and $96,000.”
Under the new rates, the Premier said the island’s top employee payroll tax rate would increase from 9 per cent in this fiscal year to 11.2 per cent in 2023-24.
Combined employer and employee payroll tax is predicted to bring $504.5 million to the public purse.
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