Payroll tax changes will ‘promote growth' – senator
Legislation reducing payroll tax for more than 80 per cent of the island’s workers has been passed in the Senate.
Under the Payroll Tax Amendment Act 2023, anyone earning less than $132,000, representing 86 per cent of the workforce, will enjoy a reduction in rates.
Anyone earning up to $48,000 will pay 0.5 per cent in payroll tax under the move, while those earning between $48,000 and $96,000 will pay 9.2 per cent, up from 9 per cent.
As they will be taxed at 0.5 per cent on the first $48,000 of their income, their monthly bill will be reduced.
Those earning between $96,000 and $200,000 will pay 10 per cent while high earners on a salary up to $500,000 will pay 11.5 per cent.
In addition, the amendments will see payroll tax for self-employed farmers and fishermen axed from 1.75 per cent to zero.
Arianna Hodgson, the Junior Minister of Finance, said on Wednesday that the amendments were designed to “promote growth in our economy” and create jobs.
Douglas De Couto, the Shadow Minister of Economic Development and spokesman for tourism, said while he welcomed the breaks, there were other self-employed workers such as musicians and “the man with a van” who would appreciate the same.
Dr De Couto said it was important to remember that while there were tax breaks, government expenditure has increased.
He said: “You are putting money in one pocket and taking money out of my other pocket – Bermudians should not lose sight of that.”
Dr De Couto added that it was important that the Government’s partnership with international business “runs smoothly” and that a tipping point was not reached that would see jobs migrate overseas.
The Public Treasury (Administration and Payments) Amendment Act 2023 was also passed in the Senate.
The amendments will allow for the granting of rebate for taxes or fees under the Consolidated Fund and will be used in the 2023 Fairmont Southampton Act currently before the House of Assembly.
A Government spokesman said this will be the first rebate arrangement into which the Government will enter to ensure that the taxes collected go to pay the loan provided to the developers by the local lending institution.
Ms Hodgson said: “It is recognised that there must be appropriate checks and balances in relation to any payments being made out of the Consolidated Fund. Therefore, the authority to grant any such rebate to any personal entity will have to be given by parliamentary approval.”
Kiernan Bell, an independent senator, asked: “How is that contingent liability accounted for so that we can have some understanding of the obligations that may come out of the Consolidated Fund?
“My understanding of a rebate in the context of a tax is you are getting back something you have already paid versus a guarantee which is a contractual obligation. How are those two things being linked in the context of making this amendment so that someone can have a rebate from the Consolidated Fund?”
Some time was taken by technical officers in pondering the question and Ms Hodgson said she could provide an answer at a later date.
However, Ms Hodgson did say: “It is the added protection that secures the guarantee. It essentially clears the cashflow of the taxes in and the payments made on the loan and so, for example, the entity is obligated to pay the tax, duties or fees and then the Government would have recourse under the applicable legislation if it is not paid.”
Dr De Couto added: “Gencom [the Fairmont Southampton developer] didn’t have the cashflow to pay for unemployment when they paid off their employees and the Government had to cover that.
“I can see when you are dealing with a counter party like that, you might wish to switch from giving the rebate up front – ie, never pay the tax – to holding on to it to make sure the conditions are met before you pay it back. It is good risk management.”
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