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Cox Delivers Bermuda Budget

by Mike Godfrey,, Washington

20 February 2007

Delivering her 2007/08 Budget on Friday, Bermudian Finance Minister and Deputy Premier, Paula Cox suggested that the jurisdiction's economy is in a "good place".

She announced that:

"Bermuda occupies a unique place in the world. Through vision, hard work and prudent management of opportunities we have developed as a prosperous, dynamic, sophisticated and cosmopolitan mini-metropolis."

"We have coped well with the challenges of globalisation, riding the waves of technological change while making the necessary adjustments to remain
competitive. In all of that, this Government has not lost sight of the social contract – the commitment to taking care of the needs of our people."

"In many ways, we represent a standard of excellence, a ‘gold standard’ if you will. We must nurture it, protect it and ensure that it works for all of us – bar none."

"That is the story of the National Budget 2007/08: nurturing growth in an equitable manner in order to enhance the well-being of our people."

Speaking with regard to the Bermudian economy, the Finance Minister revealed that in 2006:

  • The balance of payments was on track to record a surplus on current account in the range of $825–$850 million in 2006;
  • GDP growth is now forecast to exceed the target range of 2.75–3.0% for 2006;
  • The inflation rate held steady at 3.1% in 2006; same as 2005;
  • The employment level was up by about 2% in 2006; and
  • International business and tourism posted strong results.

Looking to the coming year, she stated that the government’s outlook for 2007 is positive, with the expectation that the sound macro-economic trends will continue. Expected developments include that:

  • GDP is expected to grow in the range of 3.0-3.25%;
  • The inflation rate is expected to hold in the region of 3.0% (if oil prices hold steady); and
  • Balance of payments is expected to remain in surplus.

In order to provide a fillip to new and modernised industries and ensure that the labour market is adaptive to the existing and emerging needs of businesses and employers, she revealed that the government is:

  • Providing duty relief to businesses in the tour boat industry;
  • Providing a concessionary payroll tax rate of 4.75% to new start-up businesses in the Economic Empowerment Zone (the “Zone”);
  • Providing $250,000 of seed capital to a company formed by young entrepreneurs setting up a social enterprise business in the Zone;
  • Boosting the resources of the Bermuda Small Business Development Corporation by a further $1.5 million; and
  • Providing additional payroll tax relief to the hotel sector.

In 2006/07, she revealed, the Bermudian government will collect some $856 million in taxes, an increase of $21 million on the original estimate of $835 million. For 2007/08, Government has budgeted to raise $917 million in total taxes.

Most major tax rates will remain unchanged, but there will be some increases in the following areas:

  • The salary cap under the payroll tax will increase to $350,000;
  • Company fees will increase by about 5%; and
  • Foreign currency purchase tax will be set at 0.50%.

There will be no changes to:

  • Customs duty (except for some rate reductions);
  • Land tax;
  • Passenger tax;
  • Standard rate of payroll tax;
  • Bus and ferry fares; and
  • Stamp duties.

The full text of Bermuda's 2007/08 Budget can be found in the Tax News Resources section.

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