Finance Minister Curtis Dickinson announced a number of fiscal measures undertaken by the Bermuda Government to help stave off the economic impact of the global COVID-19 pandemic.
Speaking at the latest briefing on Tuesday, the Minister said: “We have quickly taken appropriate steps to ensure the availability of emergency financing to supplement reduced revenues and COVID-19 related expenditures.
“Actions taken in this regard include: Executing agreements for $170 million of credit facilities with local financial institutions.
“Further, preparations have already commenced to issue long-term government debt in the global capital markets, which will allow for the refinancing of these and other facilities, as well as effective management of the economic fallout from this crisis.
“Subject to market conditions, this transaction may also involve the refinancing of current government bonds at a more favorable interest rate.”
In the ongoing bid to provide “income support to individuals and households” hard hit by unemployment as a result of this pandemic, he said the Government has “paid benefits to over 9,700 persons for a total cost to date of approximately $38 million”.
Now that the mandatory shelter in place restrictions have been lifted, the Minister added: “More than 3,500 persons have already gone back to work and are now off the programme.”
The unemployment benefit scheme was recently extended for another four weeks “with the maximum benefit now being 16 weeks”.
“The cost to extend this benefit is estimated between $6 – $10 million.”
♦ Highlights of the Minister’s Full Statement
Measures to assist businesses – Deferral or temporary reduction of taxes/fees/penalties:
The Government has implemented further emergency measures to assist businesses that have a pressing need for financial relief as a result of this pandemic.
The Payroll Tax filing deadline was extended from April 15th, 2020 until May 15th, 2020. Approximately 1,250 businesses took advantage of this extension.
Penalties and fees that would normally apply for that period were waived.
For local companies and permit companies that were not able to facilitate their legislative filings and payments electronically, the deadline for filings and fees in relation to corporate reporting and taxes was extended to June 30, 2020. 1,040 companies took advantage of this concession; and $850,000 in fees were deferred.
Current penalties and fees that would normally apply for that period are also being waived.
On May 21st 2020 Government announced further short-term relief from payroll tax to assist the restaurant and bar sector. During this quarter ending 30th June 2020, payroll tax has been set at a zero rate for the restaurant and bar sectors and these businesses have ceased deducting payroll tax from employees during this period.
The fiscal implications of these actions will be a reduction of Government revenue (estimated at $750,000 to $1 million). However, we anticipate that this relief will ease some of the pressure on restaurants and bars, and especially lessen the pain being experienced by many Bermudians who work in this sector.
Customs Duty Relief:
To assist with preparations for the threat of COVID-19, the Customs Tariff was amended during the budget session to provide duty relief for personal protective equipment and supplies.
Since 11 March 2020, when this amendment was brought into force, $1.5 million in Customs Duty relief has been forgiven.
On May 20th the Government announced that the Customs Department will, with immediate effect, allow retailers and other commercial importers to apply for duty deferment for up to six months on imported business goods subject to a minimal surcharge.
Import duty is normally payable at the time each import declaration is made to Customs; We recognised that upfront duty payment can place a strain on a business’ cash flow and that buyer demand is likely to be significantly impacted by the fallout from COVID–19. Duty deferment will allow customs traders, in particular retailers and Customs Clearing Agents, to increase the efficiency of payment handling and the management of their cash flow.
Long term duty payment deferral (more than six months) is also now available in certain circumstances.
Further relief for employers:
Employers who take up the benefit allowed by the amendments to the National Pension Scheme (Occupational Pensions) Act 1998, which were previously highlighted in relation to its impact on employees, will have a reduction in operating expenses (5% of payroll).
Total NPS Contributions are approximately $250 million per year.
Participating employers will also benefit from a reduction in operating expenses of $35.92 per employee per week. ($143.68/month), in relation to the amendment to the Contributory Pensions Act that was also previously highlighted for its impact on employees.
Total CPF Contributions are approximately $113 million per year.
It should be noted that if the suspension of contributions is taken up across the public and private sector, it will provide both relief and stimulus to families and businesses. The stimulus to the economy will be generated if some of the saving is converted to consumer spending in the local economy and business investment in infrastructure and improvements.
Public Sector loans/guarantees or Government loans/guarantees – Assistance to Small and Medium Enterprises
With respect to direct financial support to small and medium-sized enterprises (SMEs), the Bermuda Government, together with the Bermuda Economic Development Corporation (BEDC) developed the Business Sustainability & Continuity Funding Programme in response to the impact of COVID-19 on Bermuda’s SMEs. The programme, which will be in place until the end of 2020 (or until the funds are fully deployed), totals $24 million funded by a $12 million grant from the Bermuda Government and $12 million by BEDC from its allocated funding. The relief funding programme consists of a range of financing products for businesses to take advantage of such as:
– BEDC direct micro loans as well as relief micro grants
– BEDC guarantees for overdrafts from Banks
– BEDC guarantees for loans from external entities (such as Banks; Credit Unions; Private Companies; and Individuals)