Hamilton, Bermuda, March 2nd, 2010. Having now had the opportunity to carefully study Friday’s Budget Statement, and acknowledging the difficulties in framing a budget in the current economic climate, ABIC must register its disappointment at the structure of the budget and in particular the lack of overall Government cost cutting measures needed to trim the high cost of Government in Bermuda, which if left unchecked could delay and potentially inhibit the prospects for a recovery of the local economy in the long term.

ABIC recognizes that in the current depressed economy there is a need for stimulus and we acknowledge that International Business, as the central component of Bermuda’s economy has a significant role to play in helping Bermuda weather the storm. We are, however, increasingly concerned with lack of resolve from Government in cutting back on unnecessary expense. Instead, we see Government asking taxpayers, corporate and individual, to shoulder the entire burden of making up for the ever-widening gap between revenue and expenditure. Borrowings have again shown a large increase and the cost of servicing that debt will once again fall on the taxpayer for many years to come.

We note positively that the Minister intends to implement controls to address cost overruns on capital projects, and that the Ministry is mindful of the various reports from the Government Auditor General’s office highlighting the lack of accountability and fiscal restraint that currently exists in many areas of Government. We encourage the Minister to further extend this fiscal restraint and accountability to the current expenditure components of the Budget. From outside of government, it appears that the key driver to managing the overspend is the robust enforcement of proper financial controls in keeping with the stature of a domicile such as Bermuda.

As stated earlier, International Business and its employees will bear the bulk of these tax increases as some other sectors of the economy receive varying levels of exemptions. The 14% increase in payroll taxes and, in some cases, a tax increase of well in excess of 100% on the most senior job creators in the International Business sector will only serve to make Bermuda and the companies located here less competitive in the global economy, and will undoubtedly have a negative impact on retaining our current business or expanding employment here. We would point out that International Business in Bermuda is comprised of much more than the large insurers/reinsurers that receive much of the local coverage , and the bulk of ABIC’s membership comprises service companies where payroll , and hence payroll taxes , form a large part of the budget . Some of our member companies will see their payroll tax costs increase by more than 50% as a result of these increases in the budget.

Many of ABIC’s members have outsourced operations to other domiciles and others are now actively considering outsourcing, these are jobs permanently lost to Bermuda because of the already high cost structure in the area of employment. The proposed tax increases will likely diminish job growth in Bermuda. Given that the global economic environment is expected to gradually improve, we would strongly encourage the Minister to implement the proposed payroll tax increases as a temporary crisis measure, with a firm commitment to reverse these when, and if, Bermuda’s growth rates return to their historical norms.

ABIC urges Government, as a matter of urgency, to institute measures to ensure that budget overruns will simply not be tolerated in the year ahead, or in the years to come. We further encourage Government to consider these measures within the framework of a closer and more transparent dialogue with ABIC and the other International Business organizations in order to reassure International Business that Bermuda remains a welcoming domicile of choice for those companies that are here and those that may be created here in the future.

ABIC and its member companies have a strong commitment to Bermuda and look forward to working with Government to address any and all of the issues raised in this statement. We are in the process of compiling detailed information from our members in relation to the impacts of this budget and how it impacts their future planning.