Bermuda Business To Get Tax Relief

Bermuda Gazette

06 November 2001

This story is reproduced by kind permission of The Royal Bermuda Gazette at: http://www.accessbda.bm

The Government has announced details of the proposed payroll tax relief for businesses – including retail stores, restaurants, small businesses and taxi drivers – affected by a decline in tourism after September 11.

The three-month relief package could see some employers' portion of the payroll tax fall to between half a percent and three percent of payroll amounts.

The bill, titled the Payroll Tax Rates (Special Provisions) Act 2001, was tabled in the House on Friday. But retailers will not see the drop in rates until the new year, with the lowered taxes taking effect between January 1 and March 31, 2002. The Bill, which is an amendment to the Payroll Tax Rates Act 1995, is still to be debated and passed by the House.

The revised rates are targeted at employers, while the maximum employee deduction remains at 4.75 percent of payroll. At the lower end of the scale, self-employed persons or employers carrying on business where the total annual payroll is less than $100,000 will see a drop of two percent – to 5.25 percent – from the regular rate of 7.75 percent payroll tax.

Employers who fall in to this category will be allowed to deduct up to the maximum of 4.75 percent from employees, leaving them with a half percent employer's contribution.

Employers who have total annual payrolls of $100,000 to $200,000 will also see a break of 5.25 percent on the first $100,000 of payroll while the balance of payroll will be subject to the rate of 7.75 percent. Employees will still be subject to up to 4.75 percent deduction.

The normal taxation rate, for this group is 7.25 percent on payroll below $100,000 and 9.25 percent on the balance, which is not to exceed $200,000 in total.

At the top end of the scale, employers with annual payrolls greater than $200,000 stand to see a five percent drop from the existing rate of 12.75 percent to the temporary rate of 7.75 percent.

And taxi drivers – who qualify as self-employed persons, and currently pay a flat annual rate of $1,500 should see a break in the region of $270.

In order to benefit from the rate drops, employers and self-employed persons must not be in arrears on payroll tax remittance, beyond two tax periods.

The announcement of temporary tax breaks for a number of business sectors was met with mixed reaction from the business community. Chamber of Commerce President Charles Gosling heralded the tax breaks as good news: "Overall this will certainly be a great help to retail and restaurateurs on the Island," he said. Mr. Gosling said further the reductions could prove to be of assistance to businesses during what is an already quiet business period.

David Ezekiel, head of the Chamber's International Business Division said that while the payroll tax reductions will not apply to international businesses, he sees Government's move as a positive. "I am encouraged and delighted to see Government help those directly affected. The Government needs to continue to monitor the situation as a lot of entrepreneurs and businesses have been hard hit by," Mr. Ezekiel said.

But, Bermuda Employer Council (BEC) President Gerald Simons, in breaking down the actual savings to employers, questioned if it would make a significant difference for businesses already in trouble.

Mr. Simons, on calculating that companies with annual payrolls of $100,000 would stand to save a maximum of $500 over the period – or $38 per week, said: "Employers will appreciate any reduction in their tax bill, however the maximum reduction is in itself unlikely to save a failing business."

Mr. Simons added however that the limited scope of the relief package was not surprising, given the constraints within which the Finance Minister must operate.

Meanwhile, one executive, who asked not to be named, said he was surprised Government had not broken down the reduction between employers and employees.

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