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Next 12 months will show if payroll tax changes drive away jobs – Wight

John Wight, the former chief executive of the insurer BF&M

The next 12 months will prove key to showing whether Budget tax rises for higher earners have driven well-paid jobs overseas, the independent senator John Wight said yesterday.

Mr Wight also insisted that it was very important for the Government to prioritise starting to drive down the island’s debt so that annual interest payments of $130 million can be switched to health, education and elderly care.

The former BF&M chairman, who cited international business as “hugely the driving force behind our economy”, said there were limited ways for Bermuda to boost revenue.

The Budget saw employee payroll tax rates for those earning between $96,000 and $200,000, rise to 10 per cent, for those earning between $200,000 and $500,000 it increased to 11.5 per cent and for those earning between $500,000 to $1 million, it climbed to 12.5 per cent.

Mr Wight told a Budget debate in the Senate: “We will observe over the coming year whether those employees in higher tax brackets will be facing more out of pocket payroll taxes, often paid for by their employer, will cause jobs in Bermuda to again go onshore.”

Mr Wight emphasised that debt levels must be addressed.

He said: “It is so very important the large government debt of approximately $7 billion, including unfunded pension and health liabilities, begins to start to be paid down.

“Bermuda so desperately needs the $130 million of annual interest on our debt to be prioritised and reduced so that these funds can be allocated for health insurance for the uninsured and under-insured, strengthening the education system and elderly care.”

The senator said he was “very hopeful” that, outside of the debt, the Government could produce a balanced budget in the 2024-25 financial year.

Mr Wight said increasing population levels was the only way forward as both parties were wary of imposing a level of tax that would push large numbers of jobs onshore, and considered cutting the Civil Service “distasteful” in such a small community.

The senator applauded the Government for talking about the necessity of attracting people to the island, but insisted ministers now needed to set out a game plan to do so.

Mr Wight said: “If increasing government fees is not a good option, nor is reducing government expenses through civil service downsizing, then we are left with one alternative — generate more economic activity by having more people in Bermuda paying into our tax system, and using products produced by Bermuda businesses and services offered by Bermuda businesses and proprietors.

“This has often been a contentious issue in our community for whichever party is in power.

“What is missing in my view … was the economic recovery plan, which we are told is forthcoming.

“What is the game plan for attracting more people to Bermuda?”

Mr Wight questioned increases in staffing in some large departments such as education and health and called estimates for revenue raising in others, such as the Office of the Tax Commissioner, as “aggressive”.

He said: “In reviewing the larger ministries in particular, I was surprised to see the number of employees going up, not down, thereby increasing the cost of government.

“I was also surprised at the expenditure increases for some of the smaller heads, such as Marine and Ports, which is going up year on year by $2.3 million, or 12 per cent.

“On the revenue side of the equation, I was curious to see some of the assumptions for the coming year.

“In the Office of the Tax Commissioner I note the Government is budgeting for additional receipts year over year of $59 million, or 13 per cent.

“This seems aggressive to me in light of rate decreases that the Minister of Finance had presented.”

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Published March 16, 2023 at 8:07 am (Updated March 16, 2023 at 8:07 am)

Next 12 months will show if payroll tax changes drive away jobs – Wight

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