Bermuda's Opposition Labels Payroll Tax Windfall An 'Embarrassment'

by Robert Lee, Tax-News.com, London

16 November 2001

Bermudian opposition leader, Dr Grant Gibbons, has criticised the government for boosting its coffers with the collection of additional payroll tax of almost $20 million. In a report in the Royal Bermuda Gazette, Dr Gibbons described the tax as an embarrassment at a time when the business sector is struggling in the current economic climate.

Dr Gibbons said: 'International businesses were hit very hard by this change, and Government had to adjust the cap down. The additional revenue may be a little of an embarrassment for Government, as exempt companies have been complaining as a consequence.'

The $20 million resulted from an adjustment to the payroll tax structure forcing companies to report earnings up to a new ceiling of $250,000 but the figure was then amended to $225,000 after a multitude of complaints from businesses, particularly exempt companies, across the Island.

There was also a leap in other tax revenues: customs duties amounted to $175 million, which represented 28 per cent of total revenue; land tax came in third with $36 million; and licensing fees for International companies brought in around $44 million. 'The bulk of the revenue increase is coming from increases in taxes,' said Dr Gibbons.

According to the Royal Gazette, the government reported current account expenditure of $620 million compared to last year's $544 million. Finance Minister Eugene Cox pointed to changes in pension costs; in a statement to the House he said: 'The net operational result prior to the adjustment (for pensions) is a surplus of $53 million compared to $42 million in the previous year.'

Dr Gibbons charged that the current account surplus should be calculated by taking current account expenditure from revenue, which leaves a total of $2.8 million. But Accountant General Anthony Richardson said the $53 million was arrived at by placing the deficit of $56 million against the $109 pension adjustment.

Dr Gibbons labelled this as 'smoke and mirrors' because, he argued, the deficit figure of $56 million includes capital expenditures which should not affect current account figures.

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