Taxes Left On Hold In Bermudian Budget

by Amanda Banks, Tax-News.com, London

22 February 2005

Bermuda’s Minister of Finance Paula Cox announced few tax measures of significance in the National Budget 2005/2006, which focused primarily on improving living standards for less-well-off Bermudians.

Among the tax measures announced by Cox on Friday was a restructuring of the payroll tax system in an attempt to assist small and medium-sized enterprises and attract new business to the jurisdiction.

Under the change, firms will face new tiered rates as follows:

• $0 to $200,000 – 7.25%
• $200,001 to $500,000 – 10.75%
• $500,001 to $1,000,000 – 12.75%
• More than $1,000,000 – 13.5%

Other tax measures included a 4.75% increase in social security contributions from August 2005, and customs duty concessions for the agricultural sector.

Meanwhile, the estate tax and stamp duty system is being reviewed and the government has put forward a proposal to establish protection from estate tax on family homes. In addition, land tax for over-65s occupying their own homes is to be abolished.

With regard to the financial services industry, Cox was mindful of the important role played by international business to the island’s economy, and described Bermuda as “a premier international business jurisdiction of choice”.

“We are highly regarded but also envied,” she observed, according to the Royal Gazette.

“As a result, we must guard against anything that erodes our competitiveness or diminishes our reputation,” Cox went on to state, although she added that the government remains committed to introducing international standards of financial supervision and regulation.

The Minister also reportedly announced that funds will be allocated to help bring about “self determination”, but she failed to specify the exact amount that will be spent on “fact finding” and other activities to help bring about Bermuda’s independence.

On the wider economic front, GDP growth is expected to have accelerated in 2004 to around 3%, following on from 2.1% growth in 2003. However, Cox warned that inflation, currently 3.6%, could reach 4% in 2005, and also noted that the Bermudian economy remains vulnerable to a weakening US dollar and higher oil prices.

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