Tax reforms would generate millions in extra revenue

Premier David Burt smiles as he responds to a question at his first press conference as finance minister. July 26, 2017. On Friday he tabled tax reform proposals commissioned by the former government.

Tax reforms recommended by regional experts would increase the take home pay of 90 percent of Bermuda’s workers, end state funded energy subsidies and phase out concessions for hotels, retailers and restaurants.

All this while generating an estimated $145 m in additional annual revenue by 2018 according to an analysis tabled in the House of Assembly last week.

But the new Progressive Labour Party government plans on moving ahead with its election promise of a Tax Reform Commission which it says would pursue a wider mandate than that given to the regional experts by the former government.

On Friday, Premier and Finance Minister David Burt tabled the 2015 report of IMF body Caribbean Regional Technical Assistance Center which had been commissioned by the former One Bermuda Alliance government to recommend tax reforms.

CARTAC says that Government should adopt a progressive tax on wages, end employers’ right to deduct 5.5 percent from employees’ pay packet and remove payroll tax ceilings for high income earners as well as a special relief of $600 for employers subject to a high rate.

And it recommends that replacing the “subjective” concept of notional remuneration with more objective methods such as those used in Nordic countries.

CARTAC also proposes a new tax on remuneration of labour (TRL) which would include benefits such as contributions to the pension fund and health insurance benefits.

In the long run, CARTAC suggests, the TRL would be transformed into a dual personal income tax including a withholding tax on capital income.

On indirect taxes CARTAC proposes increasing excise taxes to rake in an extra $15 million in the current year, a moratorium on new stamp duties and government fees pending a review.

In the medium term, the body says that a single unified tariff should replace the customs tariff and a 9.5 percent sales tax should be introduced for next fiscal year.

And it says, most services should be taxed at a 5 percent rate as of 2018/19.

Under the CARTAC proposals, a Value added Tax would replace the sales tax on goods and services in the long term.

Taken together the indirect tax proposals would net an extra $70 m annually by 2018, according to CARTAC, while the introduction of LTR and payroll tax reforms would rake in an extra $50.5 m annually by 2018/19.

CARTAC would also streamline property taxes – combining property registration fee, non-Bermudian property licenses and stamp duty into a unified rate when property is conveyed, streamlining land tax from seven to three rates by 2018 and shortening property assessment periods from five years to three years.

It property tax reforms would yield an extra $24.3 m annually by 2018.

And it makes a number of suggestions aimed at improving the administration of taxes and compliance.

According to CARTAC’s report, the former government wanted reform which would boost revenues of existing taxes but were “open to proposals that would expand the tax base and improve equity”.

It adds: “They do not want to increase the size of the tax administration but rather improve its efficiency and simplify compliance. Therefore, they rule out the introduction of a full-fledge income tax or a value-added tax.”

Burt told the House of Assembly that his administration’s Tax Reform Commission would pursue a “wider mandate”.

Burt did not respond to queries seeking his reaction to the CARTAC proposals.

This article belongs to Politica ! The original article can be found here: Tax reforms would generate millions in extra revenue