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The newly-appointed Bermuda Government has released its Budget for the fiscal year 2013/14, outlining a number of measures to support economic recovery, but delaying much-needed fiscal consolidation for a further year.
The territory's new Finance Minister Bob Richards began his Budget speech by highlighting the untenable budgetary deficits the territory has racked up since the start of the financial crisis. Year-to-year operating deficits, he said, had risen "unchecked" from a BMD19m (USD19m) surplus in 2008 to a projected BMD247m deficit in 2012/13. "This accelerating trend is unsustainable," he pointed out.
However, the budget outlined by Richards for Bermuda this year will expand this deficit further, with a budget deficit of around BMD247m in 2012/13 projected to widen further to BMD331m in 2013/14. This would see Bermuda's mounting fiscal deficit expand from BMD1.74bn in 2012/13, to BMD2.06bn in 2013/14, budget figures show.
Introducing the budget in the House of Assembly, Richards said: "The Government has found itself in the difficult position of, on the one hand, needing more revenue to pay for its operations and debt service, while on the other hand, not wanting to cripple the economy further with major tax increases. In this budget there are two tax initiatives which will have the effect of stimulating economic activity and employment."
The Government will offer businesses taking on new Bermudians a two-year payroll tax holiday. In addition, to boost the construction and real estate industry, license fees on non resident purchases of Bermuda property will be lowered from 25% of the value of the property, to 8% for 18 months and 12.5% thereafter. For condominiums that are not used for tourism purposes, license fees will be lowered from 10% to 6%, increasing to 8% after 18 months. For Permanent Residency Certificate holders it is proposed that license fees be reduced to 4%, before increasing to 6% in 18 months. Housing supply for non-Bermudians will not rise under the initiative, Richards underscored.
Few measures were proposed to raise additional revenues, other than duty increases on cigarettes, tobacco, beer, wines and other spirits from April 2013, worth BMD2m annually; and increases to land tax on property valued over BMD90,000, which will generate BMD3.4m.
A previous exemption afforded to seniors against the requirement to secure vehicle licenses will only be retained for the least polluting vehicles (class A, B, C, and D) and will be rescinded in respect of class E, F, G, and H vehicles. Vehicle license fees will be hiked by 3% on all vehicles.
Lastly, the Corporate Service Tax Rate will be raised from 4% to 6% to generate around BMD1.5m. A revenue-neutral reform of immigration fees will also be conducted during the year.
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