Bermuda Parliament passes corporate income tax
Bermuda’s Parliament has passed corporate income tax legislation which will fundamentally reset the island’s taxation system.
The Bermuda Senate approved the Corporate Income Tax Act yesterday after it was passed by the House of Assembly on Friday.
The Opposition One Bermuda Alliance tried to amend the Act in the lower house to ring fence the revenue for debt reduction, but this was turned back by the Government.
The Act will take effect in 2025 and will charge 15 per cent on the profits of multinational enterprises with more than €750 million (about $808 million) of annual revenue.
The tax is being introduced after the OECD agreed to impose a global 15% minimum tax and introduced a measure by which countries would be able to collect the tax from companies where another country failed to do so.
The Royal Gazette in Bermuda reported that Arianna Hodgson, the Junior Minister of Labour, Finance and Health, said that further work would need to be carried out over the coming year before the tax can come into effect, including the creation of a body to collect the tax.
Ms Hodgson said that the introduction of the tax would not scare away multinational businesses because if they were to relocate they would have to pay the tax in another jurisdiction.
She said that it was difficult to gauge how much revenue the tax would raise for the island, but said it could be “substantial” and could overtake payroll tax as the largest earner for the Government.
However, while payroll tax is fairly steady, she said the Corporate Income Tax would vary based on the profits of the international businesses.
OBA Senator and shadow finance minister Douglas De Couto said the introduction of the CIT was significant, and he praised the Government’s work consulting with the international business.
He said the amount raised through the tax would be difficult to predict or plan for, and the Government must be careful managing the proceeds.
“We would like to see the ring-fencing of this excess written into law,” he added. “That is an OBA policy we would put forward.”
He added: “Upsides could exist, but we need to put out the fire.”
John Wight, an independent senator and former CEO of BF&M, said the legislation was critical for Bermuda to maintain its gold-standard reputation.
Kiernan Bell, the Senate Vice-President, also voiced her support for the Bill, but added that there was still much work to be done.
She said that while she did not see anything included in the recent pre-Budget report, she would expect to see investments in the infrastructure needed to support the “seismic shift” in the island’s tax structure.
Ms Bell said that costs would come before revenue, and could be significant, but she would be more concerned if a significant investment was not made.
