Government’s projected tax income could apparently eliminate our 3 billion-dollar-plus national debt in the next decade.
This eye-opening prediction was made today in the 2024 Throne Speech, as Governor Rena Lalgie relayed the PLP Government’s brief comments on its intentions for the upcoming Corporate Income Tax:
“…legislation will be introduced to update the Corporate Income Tax (CIT) framework and address matters relating to use of excess tax revenue. Based on the recommendations from the Tax Reform Commission and the International Tax Working Group, this legislation will codify how funds collected by the Corporate Income Tax regime will be reserved for use. The projections state that with the next 10 years, the Government should have enough in additional tax receipts to eliminate Bermuda’s Debt and establish a sovereign wealth fund to make strategic investments for Bermuda’s future.”
The Corporate Income Tax is Bermuda’s local application of the OECD-mandated 15% global minimum tax.
This only affects the net income – essentially the profits – of large multinational companies with revenues of at least 750-million euros.
The Throne Speech promises legislation that will direct those new tax revenues to a certain place, but it doesn’t tell us what that place will be.
It drops a hint, by stating that projections suggest the national debt could be cleared within ten years by additional tax receipts.
How could this work?
Government revenues for 2024 were estimated to be $1.23 billion as of February, although predicted payroll tax revenues have increased since then.
An approximate 4 million-dollar Budget surplus has been forecast following the mid-year review.
So, to clear our near $3.3 billion debt in 10 years, we need on average a $330 million surplus every year – and that’s only if all the surplus went on debt.
Premier David Burt said in February that annual Corporate Income Tax revenues could be more than double that figure.
One thing that was not addressed in this year’s Throne Speech is how other measures may be used to balance out the impact of the CIT.
In last year’s Speech from the Throne, the Governor said “additional revenues that may accrue to the Government must be balanced by a reduction in existing taxes and customs duty to ensure that Bermuda remains competitive and retains our thriving international business sector.”
The corporate income tax set to come into effect in less than two months, on January 1st 2025.
