Cox Announces Laissez-Faire Budget For Bermuda

by Phillip Morton, Investors Offshore.com

26 February 2009

Bermudan Finance Minister Paula Cox announced a USD1.1bn budget for 2009-2010 on February 20, stating that no heavy-handed stimulus package would be introduced, in order to ensure minimised government debt. She predicted that the economy would make a slow recovery by the end of 2010.

Addressing the House of Assembly Cox stated:

“None of the major tax rates will be increased in 2009–2010. On the contrary, government proposes to extend some existing tax concessions on capital imports for major building and renovation projects in the hotel and restaurant sectors as well as the telecommunications sector. The fuel concession for commercial fishermen also will be extended and duty rates for a range of energy-efficient goods will be set to zero.”

Cox then announced an exemption for first-time home buyers from stamp duty on properties below USD750,000 in value: “This concession should make home-ownership for young families both more achievable and more affordable,” she explained, adding: “Furthermore, the proposed exemption from stamp duty on real estate transactions below USD750,000 combined with the prevailing buyers’ market in the real estate sector may have the effect of stimulating more renovation work on smaller properties with the expectation of a more likely sale.”

“This stamp duty concession represents the continuation of tax policy that has been both fair and reasonable to the community at large and to young families and individuals in particular.”

“Seniors have benefited from the exemption of land tax on the home that they occupy. Families have benefited from the specific tax exemption for the primary family homestead as well as the customs duty concession on affordable housing schemes with pre-fixed sales prices below USD750,000. Following on last year’s restructuring of stamp duty in this area, the proposed concession provides a further boost to young persons and other individuals or families seeking to secure their first ‘piece of the rock’.”

Although fiscal measures in Cox’s budget overall are fastidiously cautious the Finance Minister did allow one significant cut in duties on boat imports, from 55% to 22.25%.

Long-term projects will be put on hold as well, she explained, although Bermuda’s forthcoming 400th anniversary would be allocated USD2m, a project for free day care for families will see USD1.5m extra funding and USD10m will go towards providing free health care for seniors from April, she explained.

Cox announced revenue projections for the coming year, stating:

“The economic slowdown will have a negative impact on government’s total tax yield in 2009–2010. Government therefore is projecting a revenue budget of USD969m in 2009–2010, some USD16m below the original estimate of USD985 million for 2008-2009.”

Cox admitted that although the long-term national debt ceiling would climb to USD1bn dollars, USD250m would be held in reserve: "This is not to be used to cover government operational expenditure or capital investment outlays, but for an extraordinary and strategic response, should it be required, to any subsequent systemic threat or risk issues to our economy," she said, “While we hope not to have any need to incur additional debt to cover any systemic risk, government must hope for the best and plan for the worst.”

“While the economic outlook for 2009 is a cause for concern, Government is confident that with a collective response that integrates the resources, talent, wit and resilience of all stakeholders in our community, we will get through the challenging times ahead,” rallied Cox.

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