Like two snarling beasts, the two parties have bared their fangs, beat their breasts, uttered great roars, and circled one another. All this snarling, roaring, and breast-beating took place inside the divided chamber of Bermuda’s three hundred and eighty-six year old Parliamentary system. The snarling and fang-baring was the annual scrap over the morsel of Bermuda’s annual budget.
Snarling and breast-beating is now done. The Budget is passed. The two beasts now pad off for an Easter break. Having rested, they’ll come back again. That’s Bermuda’s three hundred and eighty-six year old system working as it was designed to work.
For three hundred and seventy-eight years it worked against the interests of the majority of Bermuda’s population. For the last eight years it may have worked for the interests of the majority population. Democracy is all about the good of the majority without doing harm to the minority. For three hundred and forty years, Bermuda’s system clearly and specifically disadvantaged the majority and advantaged the minority. For three hundred and seventy-eighty years, the system was a democracy in reverse.
With the big annual snarl now over, and after resting, the two beasts will return for more scrapping and posturing. That, again, is how the system works. Through it all, I’m still upset by one important, but admittedly esoteric, issue. Taxation.
Why does Bermuda still retain the Customs Duty system as a major revenue raiser? Why?
The basis on which it was first levied and then subsequently maintained, has changed. Using Customs Duty as a primary revenue raiser is now – I believe – both wrong and counter-productive.
It isn’t just the demise of Trimingham’s and the special hardships visited on Bermuda’s still declining retail segment. Nor is it just the fact that our new-style tourism is not making, and in future will not and can not make, the revenue contribution through customs duty that our old-style tourism certainly did.
I’ve observed that every time there is a new initiative to do something to enhance the quality of life for Bermudians, or to encourage investment in the tourism industry, the first – the very first – concession offered is an exemption from or reduction in Customs Duty. This has already happened with several other tourism initiatives. It has just happened again with Col Burch’s ‘Loughlands’ middle-income housing project.
Clearly, very, very, clearly, many people in power see Customs Duties as a barrier or a difficulty or a negative. Why, then, keep the system? Why? Why not consider the obvious alternative of instituting a graduated Corporate Tax on Corporate profits on Bermuda companies?
REMOVE the Customs Duty Tariff in its entirety. Or reduce it to a much smaller tariff on just some few luxury items. Or put on a small – 5%? – General Sales Tax. REPLACE the revenue from Customs Duty with a graduated Corporate Profits Tax that does not go higher than 8% total on annual profits in excess of $5,000,000. Give the International Business Sector a Tax rebate of 80%. This will mean that the maximum [graduated] tax paid by any IB entity would be 1.6% of their annual profits.
Just look at the local company numbers. HSBC [Bermuda], declaring Bermuda branch profits of $120,000,000 would pay close to $9,000,000. Butterfield Bank, declaring $100,000,000 would pay about $7,500,000. Argus Insurance, declaring $17,000,000 would pay about $1,300,000. BF&M Insurance? BTC? BELCO?… Of course all these entities would first get ‘tax relief’ because they would not have to pay any Customs Duties. Then there’s all those Accountancy and Legal firms. They would also get tax relief from Customs Duty, but would pay up to 8% on their annual net earnings.
‘Arrybody’ – people, government, retailers, Tourism, International Business Service Providers, and International Business itself, must surely recognize that our tax system is outdated and needs to shift. So – shift it!
Out with Customs Duty. In with graduated Corporate Profits Tax. Off with ‘tax haven’ sobriquet. On with ‘normal’ tax jurisdiction reality [just that we’d be taxing much lower than our competitor jurisdictions]. Start a real effort to lower some rocketing local costs and put a lid, of some kind, on our steeply rising and globally high local costs. Instead of one more, and one more, and one more… time, giving concessions on ‘Customs Duty’; be bold and sagacious! Shift taxes! Use a graduated Corporate Profits tax.