PLP Government Fiscal Budget 22/23 “No New Taxes”

 PLP Government Fiscal Budget 22/23 “No New Taxes”

Premier Delivers 2022-23 Budget Statement From Global House this Morning
The Honorable Premier and newly-appointed Minister of Finance David Burt, JP, MP delivered the Government’s budget statement for the 2022-23 fiscal year.

For the PLP, moving beyond the pandemic that has turned the entire world upside down means reviewing their focus on delivering what Premier Burt calls the “most progressive platform ever.” He believes that the budget tabled today will support the delivery of that platform.

This year’s budget, according to the Premier, was delivered after having received an unqualified audit of the Consolidated Fund for the 2020/21 fiscal year.

Premier Burt believes that because the Opposition party must criticize the policies of the current government, facts can get lost or overshadowed sometimes. This is why, according to the Premier, the comments made by the independently run Fiscal Responsibility Panel, whose report for 2021 was released just days ago, was referenced multiple times throughout the budget statement.

When the now-Opposition party One Bermuda Alliance was in power from 2012 to 2017, Premier Burt highlighted, the island’s national debt was raised from $1.2 to $2.4 billion. According to him, this left the PLP with very little wiggle room in terms of borrowing any more money when they regained power in July 2017.

“ Much to the surprise of those who think the worst of the PLP’s fiscal capabilities, we held true to our 2017 election commitments, reprioritized our spending and not only avoided increasing our debt ceiling in 2018 but also reduced our deficit from $182 million under the former Government to $70 million in just the first year,” he read.

However, a lot of that hard work was undone later that year, when the Government received a default notice relating to the Carolina Bay Project at Morgan’s Point.

“ As a result of the default notice, Government was required to raise the debt ceiling by borrowing $200 million to honor an obligation that the former [OBA] government had committed us to with a guarantee that the PLP had vehemently opposed [from the very beginning],” he said. “ It must be clear that the debt ceiling was not raised [under this government’s leadership] until we were required to honor a guarantee issued by the OBA Government.”

The Premier then highlighted how Bermuda and the entire world was faced with a once-in-century pandemic in March of 2020. Given its unpredictability and the negative effect that the Coronavirus had on nearly every aspect of Bermudian life, the PLP had to raise the debt ceiling again to cover COVID-related expenses and provide support to people who were suddenly out of work.

“ Over the last two years, this Government has spent in excess of $100 million in direct assistance to citizens and businesses, including over $80 million of direct assistance to individuals, which started immediately after the declaration of a pandemic and continued into this fiscal year due to the outbreaks that the island has experienced,” he read. “

Additionally, support has been given to small, medium and large businesses through the Bermuda Economic Development Corporation, and there have been a significant number of tax rebates and concessions that have been made to support various industries in Bermuda. ”

The Government’s current economic recovery plan, Premier Burt reiterated, is primarily focused on “ economic diversification strategies, reducing socio-economic disparities and leveraging Bermuda’s natural resources and geographic advantages.” The Premier believes that the island’s economic structure will gradually be solidified through this approach.

“ The goal of each initiative is to generate stimulus by increasing GDP, job creation and investment, improving income, quality of life and the business environment, reducing economic disparity and, of course, improving public finances,” he said.

Turning to the area of Fintech, Premier Burt highlighted that out of the 13 digital asset businesses licensed by BMA, six were licensed in 2021 and three have already been issued this year. According to him, the number of licensed Fintech companies in Bermuda is expected to double while existing ones continue to expand their operations.
The Premier highlighted that Bermuda saw small signs of economic growth last year, supported by a rebound in quarterly gross GDP.

“ Positive economic performance was fuelled by new international business registrations, visitor spending, greater levels of household consumption and increased construction activity, indicating a gradual shift towards economic recovery,” he said. “ When compared to 2020, Bermuda’s GDP, the primary indicator for economic growth, is estimated to have grown between 3–5% in 2021.”

However, Mr. Burt admitted that more must be done to continue to grow our economy. The return to pre-pandemic job levels in Bermuda will, he stated, be heavily dependent on the recovery and success of its tourism industry.
“ While we manage the local economy, the island’s status as a top-class international financial center is under constant threat from external forces,” he said.

Some of these threats include the OECD’s global minimum corporate tax initiative, a possible resurgence of the Coronavirus and geopolitical tensions, to name a few.

“ So much in this country depends on a successful tourism industry. Without it, we do not have sufficient visitor numbers, our attractiveness as an international business jurisdiction is reduced and all of the businesses that support it suffer, including food services, transportation and

entertainment,” Premier Burt read. “ Tourism is essential, and it is the responsibility of the Government to use all of the tools at its disposal, including appropriate guarantees where necessary, to facilitate successful hotel development.”

Premier Burt assured the public that 50 percent of any additional surplus gained during the last fiscal year will be given back to taxpayers. “ If the projected deficit for the last fiscal year (2021/22) comes in below estimates, 50 percent of those funds will be used to reduce taxes on imports to reduce the cost of electricity in Bermuda,” he explained.

To provide more financial relief for residents and their families, the Government plans to cut vehicle licensing fees for all private cars by ten percent. For example, the current licensing fee for cars in Classes A and D are $304.08 and $730.08 respectively. The new reduced fees will be $273.67 and $657.07 respectively.
Premier Burt admitted that they will not be able to completely eliminate payroll tax for people earning under $48,000 during this fiscal year, there will be continued reductions for people who make less than $96,000.

“ Before this government was re-elected in 2017, a worker earning $48,000 would pay $2,280 in taxes,” he explained. “ Next year, that same worker will pay only $720, a reduction of 68 percent since this government took office and a reduction of $240 compared to last year alone.”

“ There are no tax increases in this budget and anyone making more than $96,000 will not see their payroll taxes increase,” he continued.
Some other relief measures which were mentioned within this morning’s budget statement include relief extensions for restaurants and hotels, a two-year extension for new hire relief, the removal of land tax for care homes and the implementation of a new tax relief commission, to name a few.
Premier Burt then briefly discussed last year’s fiscal performance and the deficit actually came in lower than predicted at $184 million. The projected deficit was $245 million.

“ The latest revised forecast projects that Government will earn $1.03 billion in revenue in 2021/22. This is $31.3 million (3.1%) more than the $998.9 million in original estimates,” he stated. “ This is due to Customs Duty, Passenger Tax, civil aviation receipts and travel authorization forms performing better than expected.”

With the deficit being lower and earning more than expected, the operating expenses, excluding debt management, is expected to be higher than predicted in last year’s budget. The budgeted amount was $888 million. The predicted number is going to be closer to $904.3 million. To offset these expenses, the Premier says that the Government saved in employee overheads, wages, salaries, materials and supplies, particularly within BHB.

As of March 31 of this year, the debt is predicted to stand at $3.1 billion, with a sinking balance fund of $231 million to fund future deficits.

The expected revenue for this fiscal year is $1,077,802,000. The estimated interest on the debt/revenue guarantee is $129,750,000 and the deficit is estimated at $70,000,000.
“ The current account balance, before debt service and guarantee management costs, is budgeted to be a surplus of $132.7 million,” Premier Burt said. “ After debt service, the current account balance is predicted to be a $3 million surplus . . . [According to these projections], the Government will generate sufficient revenue to cover not only the day-to-day operations of Government but also interest costs, a major financial milestone as we restore public finances.”

The Government has set the fiscal year’s expenditures at just over $945 million, 6.4 percent higher than last year’s prediction ($888 million).

“ $896 million in account expenditures for this fiscal year would have been impossible to meet without sending a significant number of public officers home or cutting public services even more than the reductions that will be necessary in this budget,” the Premier explained. “ When examining what $896 million represented, it became clear that there would be redundancies in police, fire and prison services and throughout many critical Government departments. . . . The $896 million represented did not take into account that the $888 million estimated for 2021-22 contained a number of one-time measures that expired during the year.”

The Premier ended the 2022-23 budget statement by highlighting his love of canvassing and speaking with members of Constituency 18, saying that it grounds him and that they keep him working hard.

“ When I am tired and wonder if we will ever see our way out of the pandemic, or when I become frustrated because the pace of change is not as fast as I would like it to be, just a few hours in my constituency renews my energy,” he said. “ I draw on the hopes that others have for us as a Government and on the trust that has been placed in us by such an overwhelming majority. It is inspiring.”

“ We will build a better and fairer Bermuda for our children to call home, and this Government is the one that will continue to deliver the strong leadership required to transform our economy for the future,” he concluded.

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Trevor Lindsay

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