Cox explains tax changes

The 2010-11 Budget is to cut the standard rate of payroll tax from 16 to 14 per cent — a reversal of last year’s increase.

For employees, tax contributions drop from 5.75 per cent to 5.25 per cent.

Last year the Budget increased workers’ contributions by one per cent, to 5.75 per cent.

The salary cap was also increased from $350,000 to $750,000. This cap remains in place in this year’s Budget.

The Premier added: “There will be a similar adjustment of two percentage points for the majority of other rate categories.”

There was also good news for the hotel industry and retail sector.

“I can also confirm that the relief from payroll tax for the hotel sector, as set out in a Memorandum of Understanding between the Bermuda Hotel Association and the Ministry of Finance, will be extended to 31 March 2012,” Ms Cox said.

“Additionally, the relief provision of a reduced payroll tax rate for retail establishments during the months of January, February and March will continue in 2011-2012.
“Customs duty relief measures on capital goods for a number of sectors including the retail sector will be extended beyond March 31, 2011. These particular measures relate to refurbishment of premises, new retail space and local manufacture of goods.

“Most other tax rates will remain unchanged except for a minor change in the Customs tariff and Government fees, including an increase in cellular phone licences.

“I have mentioned the need to foster hope and provide help for the hurting. In this respect I am pleased to report that Government is to develop a pilot programme that will allow businesses that are in arrears with respect to payroll tax, but who are maintaining installment payment plans, to reduce their debt to Government by offering services of like value.

“The payroll tax reductions I have outlined will return approximately $50 million of spending power to taxpayers in 2011–2012,” said Ms Cox.

“This was not an easy decision given the Government’s soft revenue position but it was considered the best option for injecting some stimulus into Bermuda’s economy.

“The economic impact of the payroll tax roll-back will touch all sectors of the economy including hospitality, construction, retail, international business and local manufacturing. The hope is that jobs will be retained and where businesses are stronger, more jobs will be created.

“The fiscal impact of the payroll tax cut will widen the deficit by a similar amount but the overriding consideration is that businesses and workers need the assistance now to help them through the final stages of the recession.

“This is the essence of ‘resetting the dial’ to win the future.”