The IB sector has concerns over payroll tax reform plans
by Jonathan Kent
David Burt, the Premier and Minister of Finance, will deliver the Bermuda Government’s Budget Statement on February 17, with potentially significant tax implications for businesses of all sizes.
December’s Pre-Budget Report set out significant payroll tax reforms that, if implemented, would bring relief to lower earners and small businesses at the expense of higher earners and exempt companies.
The employee portion of payroll tax would be eliminated for those earning up to $48,000 a year. For the three bands above $48,000, the rate would rise, with the heftiest increases on earnings above $235,000, which will attract a 13 per cent levy, up from the current 9.5 per cent. In addition, the Government has suggested lifting the cap on payroll tax from $900,000 to $1 million.
On the employer side, businesses with a payroll of less than $200,000 would pay zero. Exempt companies would be subject to a higher rate of 10.75 per cent than others with payrolls of more than $1 million, who would pay 10.5 per cent under the proposals.
The report is a consultation document and the Government has been gathering feedback on its plans ahead of the Budget.
John Huff, chief executive officer of the Association of Bermuda Insurers and Reinsurers, said the proposals could “could deter international companies from continuing to invest in Bermuda and retaining employees on island”.
This warning shot fired by a leading voice in the international business engine room of the Bermuda economy makes clear the risk with the Government’s heavy reliance on taxing employment, and applying high rates to decision makers and job creators.
This comes at a potentially pivotal time for tax policy. The Ministry of Finance has formed an international tax working group to assess the implications and opportunities arising from the potential implementation of the global minimum tax. And there are also plans to reconvene the Tax Reform Commission to continue its work of planning a more progressive and broader tax system.
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“Innovation, sustainability and collaboration” is the theme of the second annual Bermuda Risk Summit, presented by the Bermuda Business Development Agency in partnership with the Association of Bermuda Insurers and Reinsurers and EY, to be held on March 6 to 8 at the Hamilton Princess Hotel.
A broad range of topics is on the agenda, as the theme would suggest. Panels will tackle subjects including regulation, the evolution of partner capital, Florida’s disparate litigation levels, investor experiences of Bermuda, global financing conditions, the future of cyber reinsurance, casualty lines, specialty lines and innovative technology.
Speakers include David Burt, the Premier, and industry luminaries including Stephen Catlin, executive chairman of Convex; Megan Thomas, CEO of Hamilton Re and Christopher Schaper, CEO of AIG Re, as well as international regulators, investors and rating agencies.
Insurance is a growth leader in Bermuda’s economy and has come through the pandemic stronger. Opportunities and challenges ahead include closing the yawning protection gaps in climate and cyber risks. The event should be quite a draw, based on the experience of last year’s inaugural summit, which attracted 350 delegates, including 80 from overseas.
