HAMILTON, Bermuda, CMC – Premier David Burt Friday presented a national budget of US$992 million to Parliament, indicating that the Overseas British Territory recorded its first budget surplus in over 20 years.
“It is my privilege to state to this Honourable House and the people of Bermuda that this Progressive Labour Party government has successfully balanced Bermuda’s budget with a projected surplus of US$210,000.
“This budget surplus is only the second budgeted surplus in 35 years. The last time Bermuda achieved a balanced budget was in fiscal 2002-23. Still, today, 21 years after that was last achieved, through the turmoil of a great recession and after being battered by a once-in-a-century pandemic, we will return this country to a balanced budget,” he told legislators.
Burt told legislators that projected revenue for the fiscal year 2024-25 is expected to reach US$1.23 billion, 6.6 percent or US$76.8 million above the original estimates for this current fiscal year.
Capital expenditure for 2024-25 is forecast to be US$112.3 million, $16.3 million or 17 percent more than the current year’s original estimate, with the government indicating that this level of capital expenditure is the most significant budgeted investment in the capital since 2010.
Burt, also the Minister of Finance, said that his Progressive Labour Party (PLP) government is anticipating revenue of US$750 million annually, on average, from the new corporate income tax.
He said US$40 million of unused borrowing would fund new affordable homes and freeze health insurance rates.
Premier Burt said that at the height of the coronavirus (COVID-19) pandemic in 2020, the government borrowed funds to “ensure Bermudian families in need could keep their lights on and had food on their tables.”
He said the government expected to accumulate US$408 million in deficits at the time” before reaching a balanced budget.
“However, due to our sound financial management and significant economic growth, we only accumulated US$322 million of deficits over the last four years, leaving us with US$89 million more in the bank than we expected a few years ago.”
Burt said the funds the government borrowed in 2020 were sitting in an account earning interest and that the law requires that it can be invested or used to fund future deficits only.
But he said the government would seek to amend the Government Loans Act “to enable the transfer of funds from the excess borrowing account if those funds would not be required to meet deficit spending.”
He said the government intended to use US$40 million of the funds, with $30 million transferred to the Mutual Reinsurance Fund and $10 million to pay for more affordable homes.
“The government’s actuaries have advised the Ministry of Health that to keep up with health insurance claims, which continue to escalate due to our aging population, the government will need to increase its health insurance rates by $45 a month.
“This government cannot and will not allow that to happen. Therefore, we intend to transfer US$30 million from the excess borrowing fund to the Mutual Reinsurance Fund to ensure that our health funds can pay claims without asking every resident in Bermuda to pay an extra US$540 a year.”
Burt told legislators that his government will invest an additional US$10 million into the Bermuda Housing Corporation to accelerate the provision of affordable housing and enable a significant expansion of the private sector rental program.”
Last year, the government passed the corporate income tax (CIT) legislation, which will introduce a 15 percent tax on the profits of multinational enterprises with more than Euro 750 million(One Euro=US$1.29 cents) of revenue annually.
“The estimates of CIT revenue that have come to the Ministry of Finance and that have been shared with the Tax Reform Commission are that the government should expect to receive, on average, at least $750 million in additional revenue each year and that initial payments on account from the CIT could commence by July 2025,” he told legislators.
“Even if the government were only to receive half of the estimated cash inflows that our advisers have stated could come to the government in the next two fiscal years, US$187.5 million in 2025-26, US$375 million in 2026-27, there will be significant additional funds.
“It is important that we adopt a conservative mindset towards additional revenues as there are many uncertainties, especially with the package of qualified refundable tax credits that will be recommended by the Tax Reform Commission and the government’s stated view that companies’ in scope’ of the global minimum tax will not be liable for employer payroll taxes.”
Burt said notwithstanding, there are urgent needs in the community, including the need for tax relief for workers and businesses, the need for investment in infrastructure, the need for relief from high electricity and food prices, and, most importantly, the cost of healthcare.”
Regarding the health sector, Burt said if the $187.5 million of CIT revenue is available in the fiscal year 2025-26, “it is this government’s view that we must take care of the most pressing issue that affects the most people, and that is the cost of living.
“The government is committed to implementing universal healthcare, and it will be important to seed a new health insurance fund with an injection of capital. This will benefit all residents and businesses in Bermuda, as reduced health insurance costs make Bermuda’s economy more competitive”.
Burt said that “there will be the opportunity to reduce or eliminate customs duty on fuel imports, which could save the average household up to US$300 a year.
“With expectations of at least US$375 million in additional revenue in the fiscal year 2026-27, there will be the ability to provide more relief … one of the challenges in operating a business in Bermuda is the employer payroll tax, which is an employment tax.
“By 2026-27, there will be the capacity to lower employer payroll taxes to reduce this burden on employers, which can only assist in bringing down the cost of doing business while boosting economic growth.”
Burt told Parliament that the government’s pension fund is hugely underfunded. The CIT revenue could support “topping up” of the Contributory Pension Fund “to minimize the increases required on businesses and residents to make the fund whole.”
Regarding the island’s debt, Premier Burt said, “Although the next tranche of debt does not mature until 2027, the government will collaborate with its advisers to, as appropriate, and subject to the recommendations of the Tax Reform Commission, channel excess cashflows to the early repayment of debt.
“The government intends to bring legislation to the House in next year’s Budget session to enshrine the recommendations of the Tax Reform Commission. This will ensure the excess funds received from the global minimum tax are invested and preserved for future years, with the necessary protections so that they can benefit all Bermudians,” he told legislators.
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