Burt urged to cut $3.2bn debt
The Bermuda Chamber of Commerce and a leading economist have called for debt reduction to be the top priority in Friday’s Budget.
The chamber called for Bermuda’s $3.2 billion public debt to be cut to below $2.5 billion by the March 2028 and to be halved by 2032.
It also said public infrastructure should be given a higher priority than was proposed by the independent Tax Reform Commission. It would like an additional $50 million to $75 million extra spent on capital projects annually.
The chamber’s calls for aggressive debt reduction were echoed by Bermuda College economist Craig Simmons, who urged urged David Burt’s government to shy away “from the Oprah Winfrey mindset” of dispensing favours to working-class people.
Their comments came as the Premier and Finance Minister prepares to present his Budget on Friday. Mr Burt is expected to have a windfall of $600 million on top of last year’s estimated revenue of $1.43 billion.
The windfall will come from the first full year of the Corporate Income Tax, which levies a 15 per cent tax on multinational companies with operations in Bermuda and total revenues of more than 850 million euros a year.
The new tax has sparked a debate about what the right balance of tax cuts, debt reduction and other expenditure increases should be.
Both the chamber and Mr Simmons used the Government’s Pre-Budget report released late last year and the Tax Reform Commission’s report to make their arguments.
The chamber urged the Government to defer proposals to set money aside for a wealth fund in favour of using surpluses for infrastructure and debt reduction.
The chamber also called for $60 million in healthcare support, with “impact plan metrics” in place for the second quarter of this year.
It called for the elimination of electricity fuel duties, with a 50 per cent duty cut at the gas pumps, and called for employer payroll tax to be capped at 7 per cent.
The chamber said the threshold stood to yield annual savings of up to $120,000 per business.
Mr Simmons called for a “coherent” Budget setting a foundation to put the people first — and, again, the use of CIT funds to eclipse debt.
The retired Bermuda College professor made the comments on his expectations for The Daily Hour talk show.
Mr Simmons said that for every Budget, politicians would hit the people “with the good news” including “no major tax increases, duty on vehicles is going to be cut, payroll taxes, if in the bottom tier, will be cut”.
He added: “In some ways it’s a sweetheart budget.” He noted Mr Burt would get $600 million from the CIT regime “to do that Oprah thing”.
He urged short-term measures against “inequalities” such as in the hospitality sector, where he said some people earned $40,000 annually.
He called for broad investment in education and transportation while bringing down electricity bills with renewable energy.
Mr Simmons said a “wiser” approach would be to “wean ourselves off of fossil fuels to the extent that that’s possible”.
“Let’s go towards solar and let’s move towards — if possible — if we could go with wind and other renewable sources to reduce our carbon footprint.”
The Pre-Budget Report forecast the winding up of Bermuda’s towering debt.
It announced plans to divert 70 per cent of revenues from the fledgling CIT into a debt-busting plan that would bring it below the chamber’s suggested $2.5 billion for 2027-28.
He also highlighted a list of recommendations from the Tax Reform Commission for “partial or complete implementation” in 2026-27.
Mr Simmons declared himself “single-focused” on Bermuda’s $3.2 billion debt, calling it a “bee in my bonnet”.
He said that while the TRC made allowance for the national debt, he held a different view on the subject.
He said: “Their view on the debt is to reduce it by half, in other words, take it from $3.2 billion to $1.6 billion in sort of like ten years’ time — that’s too much time.”
Mr Simmons said Bermuda faced a $605 million debt payment due next January, with the Government committed to paying $500 million of the sum.
He explained: “What this means is we are going to have to roll over the balance and I think two years after that there is a $400 million bond coming and the big one is the year after that, it’s like $890 million.
“We’re talking about close to $2 billion in debt coming in the next four years and that’s why for me — the $600 million [CIT funds]— it’s really about debt reduction.”
Mr Simmons forecast budgeted funds for the health sector would eat up the bulk of the fiscal plan, at approximately $240 million.
He said national security could require around $150 million, followed by the education sector at a $125 to 130 million ticket.
Debt interest payments cover the sum which would be allotted for education, he noted, calling on the community to “imagine a day when we don’t have to spend $128 million or $120 million servicing the debt”.
“We’re talking about enough money to fund a new ministry.”
Mr Simmons acknowledged that attacking debt was “all predicated on corporate income tax”, and was concerned that Bermuda “was expecting this gravy train of $600 million” to flow for the foreseeable future.
“We haven’t received a dollar yet but we are operating under the assumption that this will carry on indefinitely and I haven’t had that level of comfort.”
Mr Simmons said he expected government messaging on Friday would ride on the announcement of a Budget surplus.
He said: “Sure, we can clap but the reason for the budget surplus goes back to the additional [CIT] $600 million.”
Mr Simmons said Mr Burt “has done his best to convince us that this is sustainable” as he urged the Government to make clearing the national debt a priority.
“Get that off of our books as quickly as possible,” he added.
• To read the Bermuda Chamber of Commerce commentary, see Related Media
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