Bermuda Urged To Adopt Fairer Tax Regime With GST
Bermuda'sindependent Fiscal Responsibility Panel has urged further taxation reform, inits first annual assessment of the island's fiscal strategy since theappointment of a new government.
The Panel comprisesthree leading international experts in public policy, finance, and financialstability, and was established in 2015 to review, monitor, assess, and publiclyreport on the fiscal reform progress of the government.
While welcomingreforms to make payroll tax more progressive, and new taxes on banking andinsurance, the Panel expressed disappointment that the Office of the TaxCommissioner remains under-resourced, despite its recommendation last year thatfunding be increased. It said this needs to be addressed as a matter ofurgency, arguing that the revenue return from such investment would besignificantly greater.
The Panel criticizesthe island's current tax structure as excessively weighted towards the taxationof labor and goods, noting that this has the "perverse effect" oftaxing companies who create employment while leaving those without economicsubstance largely exempt from tax. It says payroll tax will become an increasinglyproblematic source of income as Bermuda's comparative advantage as a place forinternational companies to do business is eroded through reductions in rates ofcorporation tax elsewhere.
A goods and servicestax was scheduled to be introduced in 2017 but was delayed to April 1, 2018, inthe territory's 2017 Budget. The Panel said it continues to believe a broadergoods and services tax is needed.
Agreeing with theGovernment's concern about the degree of income and wealth inequality, thePanel recommended fiscal measures to address the issue, including taxation ofdividend income where dividends are being taken as a form of salary payment,and further general taxation of significant incomes from capital. It alsocalled for more progressive taxes on labor.
The Panel saidBermuda's Tax Reform Commission would greatly benefit from knowledgeable andindependent external advice, probably by building on the Government's ongoingcooperation with Caribbean Regional Technical Assistance Center.
By Courtesy of Lowtax.net