Curtis Dickinson told a business audience yesterday that he would have liked to have started from scratch with tax reform, rather than modify the existing code.
In his maiden Budget Statement last Friday, Mr Dickinson introduced none of the new taxes suggested last year by the Tax Reform Commission, to the relief of many in the business community.
Speaking on a panel at the Bermuda Chamber of Commerce Budget Breakfast, Mr Dickinson said of the TRC: “I think if I had to do this all over again — although I inherited this — I would task the commission with starting with a clean sheet of paper and re-architect it from scratch.
“We all understand that fixing something midstream is always difficult and not ideal.”
Speaking later with The Royal Gazette, the finance minister further explained: “Part of the challenge that the Tax Reform Commission had is that they were working with the tax code, to try and figure out how to make it work better. And what I would suggest is, if I could do it all over again, is just start from scratch.”
Asked if this meant he had reservations about some of the taxes proposed, Mr Dickinson said: “No. I think the work that they did was outstanding work.
“We have to evaluate the actions we take in the context of the situation on the ground. There were proposals for taxes in a number of different areas.
“But in light of where we find ourselves with the economy and external threats, I didn’t think at this point in time that it was the right time to be introducing new taxes.”
A sell-out audience attended yesterday’s event at the Hamilton Princess and Beach Club, which featured a panel including John Wight, president of the Chamber of Commerce, Chris Furbert, president of the Bermuda Industrial Union, Roland “Andy” Burrows, chief executive officer of the Bermuda Business Development Agency, and Nathan Kowalski, chief financial officer of Anchor Investment Management, alongside Mr Dickinson and moderator Arthur Wightman, PwC Bermuda leader.
In his opening remarks, Mr Wightman spelled out some of the challenges facing the island. He said the global reinsurance capital was shrinking, while consolidation in the industry was hurting the industry, the number of captives had fallen and the alternative reinsurance market was “likely in a phase of negative adjustment”.
Some of this was the result of external factors outside Bermuda’s control, he said.
“But equally if there are structural or systemic issues under Bermuda’s control that are making the competitive advantage of the island, once so revered, diminish, they have to be addressed. The reason — wealth generators are dissipating, taxpayers are getting compressed.”
The Budget was sensible in that it did not hit businesses as hard as some had feared, Mr Wightman said.
The island had to maintain a firm approach towards fiscal responsibility, but this while “reconnecting with the global investor community and presenting a compelling reason to to put their money to work in Bermuda versus the many other global centres who work tirelessly to show their edge.
“There is no place for complacency, there is a deep sense of urgency. We have to increase the attractiveness of doing business here. While more jobs and investment is critical, we also need a strategic government that delivers increasing value for its people. And an environment that extends a hand for all those that are reaching out.”
Mr Wight said the Budget represented a $45 million improvement in annual government finances and if the projections were achieved by this time next year, then the Government would have done “an excellent job”.
Mr Burrows said the Budget had not hurt international business, nor did it do anything to deter potential investors.
He praised the idea of relaxing condo ownership restrictions in Hamilton and added that a review of energy costs would be “widely anticipated by all sectors”.
Mr Kowalski said debt-to-GDP ratio increases were slowing and so “now was not the time to panic get desperate with taxes”.
He added: “I don’t want the debt to be used as air cover to raise more revenue and take it from the private sector. Doing so would just crush the fragile situation right now.
“Growth is stagnant at best and I don’t think the Government needs more money. I think they have enough. They need to take what they have and use it more effectively and efficiently. It’s not the time to add more bureaucracy. The private sector is pushed to the brink.”
Mr Kowalski quoted from the shareholders’ letter delivered last weekend by Warren Buffett, chairman of Berkshire Hathaway and esteemed investor, who talked about the “American tailwind”.
“It’s an environment of optimism and we need a bit more of that — we need to be accepting of creative destruction and accepting of change.
“We tend to have this unfortunate ethos of circling the wagons and protecting what we have at times, rather than having a growth mentality.”
It was impossible to achieve growth without change, he added.
Mr Dickinson spoke on the decision to suspend contributions to the sinking fund and stressed that the Government was still committed to paying down debt.
“The sinking fund is really nothing more than a savings account,” Mr Dickinson said. “Effectively, we have been borrowing at 5 per cent to make 0.5 per cent.” He said the Government had been doing this for the best part of a decade.
“That has only helped to increase our interest costs,” Mr Dickinson added. He assured that surpluses that are projected in coming years will be applied to the debt, which totals nearly $2.5 billion.
On immigration reform, Mr Dickinson said it was not a solution to the island’s economic challenges in itself. “We have to look at the problem in its totality instead of looking at one element,” he added.
Mr Wight said his members’ businesses needed more people living and working on island to replace about 6,000 who had gone.
“We need a discussion about why we need more people, and what is the number of people we need to allow us to provide the services we want to provide and to allow the Government to have the option of paying down debt.”