Bermuda: Payroll Tax Relief On The Cards For International Businesses

Mairi Mallon, Royal Gazette

08 January 2001

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

International business in Bermuda will see payroll taxes cut by millions of dollars next month when the Minister of Finance Eugene Cox announces the budget.

This is according to David Ezekiel, head of the International division of the Chamber of Commerce, who has been working hand in glove with the Government to iron out glitches in the collection of the tax.

Changes in the way the tax was collected were announced in the last budget and saw the tax paid by international companies soar from between 10 and 100 percent in the sector.

David Ezekiel, head of the International Division of the Chamber of Commerce, said since then the sector had been in consultation with the Government to reverse the increase.

In recently released official statistics, the amount of payroll tax collected by the Government between July and September 2000 had risen by $6.4 million or almost 17 percent from the period last year to $44.7 million.

Minister of Finance Eugene Cox announced last February that international companies were to be brought in line with local companies. Instead of having the option of reporting an assumed figure of over $70,000 for each employee, the companies would report actual salaries with a cap of $250,000.

It was thought at the time that high salaried employees would be evened out by those on between $40,000 and $50,000 and Mr. Cox said at the time he expected the amount of tax collected to change little due to a payroll credit of $2,400 per employee.

But there was confusion among the sector on how much extra would actually have to be paid in the end. The figures have proved that the Minister's promise that taxes for the international sector will remain flat have not worked.

And according to the Chamber of Commerce, the excess amount paid out will not be given back to the companies.

Mr. Ezekiel said: "The pay roll tax increase has had a big impact on international business. It is obviously due to the removal of the nominal pay roll amount. Until last year companies could elect to pay on a set salary per employee.

"Last year, in response to OECD concerns about the differences between international and local companies and to level the playing field it was decided to remove the nominal amount and put a cap on the pay roll tax in its place. The Government obviously chose a number to give them some comfort level in collecting."

He said that it was difficult to get an accurate figure beforehand as there were no recorded figures on the companies.

But the Chamber of Commerce has now carried out a detailed survey of their entire membership - over 200 companies with over 2,000 employees. This is two thirds of the international business workforce.

"The response we have had is very good. No company with more than 30 employees failed to answer the survey," Mr. Ezekiel said.

He added: "Choosing a cap without detailed information was a difficult thing to do. We have provided the Government with the information and have been working towards a reduction in the cap. I cannot say what the reductions will be but I can say there will be substantial reductions."

He said most firms had seen between a 10 percent and a 100 percent increase in taxes, with the worst affected firms being small companies with a small amount of highly paid staff.

"We are trying to find a balance between how much additional revenue is brought in by how much is lost."

He added: "I am confident the changes will go ahead. Certainly the intention was to keep the payroll tax revenue neutral, and it is difficult to see any reason why it would not go ahead."

He said during the talks with Government there had been no talk of reimbursements to companies.

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