*File photo
*File photo

Sin taxes are to be hiked, Finance Minister Bob Richards told MPs today.

The duty levels on cigarettes, tobacco and alcohol will all go up — which will put an estimated $2 million extra in Government coffers.

Vehicle licence fees will also go up, by around three per cent, which is likely to pull in a further $2.2 million in the current financial year.

An exemption for seniors’ vehicle licences will continue — except for those who drive larger vehicles.

Classes A-D will continue to get free licencing, but drivers of E-G size vehicles will be axed from the scheme.

And day passes on Bermuda buses are also due to go up – which will net a further $500,000.

Government also made it easier for businesses to hire Bermudians, by giving them a two-year payroll tax exemption for new Bermudian hires.

Mr Richards said: “Government expects this tax holiday to be, at the very least, revenue neutral as the effect of more Bermudians in the workforce will counteract the revenue lost from the tax holiday itself.”

He added that licence fees for non-Bermudian purchasers of Bermuda property will be slashed from 25 per cent of the value of the property to just eight per cent for an 18 month period.

After that, the licence will rise to 12.5 per cent. For condominium developments which are not used for tourism purposes, the licence fee will be cut from 18 per cent to six per cent, which will rise to eight per cent after 18 months.

Holders of Permanent Resident Certificates will also now pay a four per cent licence fee, rising to six per cent after 18 months.

Mr Richards said:”The lowering of licence fees will stimulate much-needed inward direct investment into Bermuda.

“The purchase of a new house, particularly those at the highest echelons as represented here, is frequently accompanied by renovations or customization of some description.

“Local construction companies will be required to carry out such modifications, thereby increasing the demand for labour in that depressed sector.

“As these customizations will be varied in scale and scope, it should create opportunities for construction firms both large and small, thus creating a considerable diffusion of opportunity in the sector.”
He added: “Furthermore, the fact the low licence fees will revert to higher levels after 18 months should have the same psychological effect as the end of a sale in retail – it spurs people to act sooner instead of procrastinating.”

Mr Richards added that the move should lead to more movement in a struggling real estate market and boost stamp duty income, while Customs would likely see an increase in income from duty on imported building materials.

And he said: “The 25 per cent licence fee has acted as a deterrent for many of our resident non-Bermudians to feel connected to Bermuda.

“Encouraging them to own a home in Bermuda can only be a good thing for Bermudians as it enhances the connection of their Bermudian-employing enterprises on our island.”

He added that the tax incentive would not increase the number of properties available for sale to non-Bermudians.

Mr Richards said: “With these two tax initiatives, Government has found a way to stimulate the economy and create jobs without resorting to major tax cuts which would jeopardize the solvency of the Government.”

At the same time, Mr Richards pledged that Government would go after tax-dodgers in a bid to bring in more cash and help reduce the island’s national debt.

He said: “Due to the extended recession, there are many small businesses that have struggled to meet their tax obligations in a timely fashion.

“Government will work with these businesses to make suitable arrangements. However, there are others who simply ignore their obligations.

“For this group Government will use all available means to collect overdue taxes, thereby improving Government’s cash flow and reducing its need for borrowing.”