The Withered Old Hag In The Attic

Royal Gazette Opinion, 10 February 2005

One of the greatest things about Bermuda is its tax code. There’s no income tax. Payroll tax is laughably low. And arguably more important still, residents are spared the agony of filing an annual tax return – a benefit probably not appreciated by most Bermudians, but one to which I can heartily attest.

Alas, it’s not the whole story, as I discovered when I moved to the Island almost two years ago. Bermuda’s tax system may be more attractive that that of other countries in most respects, but it has a warty, withered old hag shut away in the attic too.

Her name is the Bermuda Customs Tariff.

This document is a masterpiece of bureaucratic awfulness, its sprawling, rainforest-devouring 345 pages, 21 sections and 99 chapters detailing 5,000 different categories of item and the rate of duty that applies to each.

Most Bermudians will be lucky enough to never come across it. Bring something in in the post and the duty is calculated for you. Declare your purchases at the airport after a trip abroad and you’re only required to total their value in each of ten categories. Sure, it involves digging through your luggage for your receipts, adding up a bunch of numbers and then standing in line for half an hour to pay, but at least The Tariff is nowhere to be seen.

Imagine, however, that you’ve just moved to the Island and are bringing in a container stacked with all your worldly possessions. Hark! Is that the creaking of the trapdoor to the attic that I hear? No longer are you grouping your new purchases into ten categories, you’re grouping everything you own into five thousand.

There are several reasons why this is even worse than it sounds. First, the vast number of categories leads to considerable ambiguity. You might think that a wooden table should be categorised using one of the codes in chapter 44 – articles of wood – but in fact it should be categorised in chapter 94 – furniture. Second, the level of detail is excruciating. Is your table of a kind used in an office, a kitchen or a bedroom? All three types have different codes. Frustratingly, however, all three codes bear the same rate of duty.

Tedious? It’s the kind of activity that saps your will to live.

Fortunately I have only had to deal with this once and will likely never have to do so again. Bermuda’s retailers aren’t so lucky. For small businesses in particular, who import containers filled with many different items, the pain of completing the paperwork can be extreme and only adds to their already high costs of doing business. (As if that wasn’t bad enough, retailers pay the same rates of duty as you and I. And you wonder why you can often buy online from the US for less than you would pay in a store in Bermuda?)

It’s not just determining the code to use for a particular product that’s so time-consuming. The form on which a customs declaration must be made is also pointlessly verbose, particularly if you’re filling it out by hand. For each product category you must specify a customs procedure code which is almost always 4000. Then you have to enter the total value of the goods in that category, first in its original currency, then in Bermuda dollars, then again on the line where you calculate the duty owed and once more where you calculate the wharfage. Yes, you’re obliged to calculate wharfage separately for each product category, even though the rate is the same for all items in a shipment and could just be calculated once at the end of the declaration. There is a shorter version of the form, but that can only be used for non-commercial shipments and commercial shipments below $2,000.

Shortly after the tariff was introduced, small businesses lobbied the Government to simplify it, arguing that as most of the categories bear the same rate of duty they could be collapsed into a smaller number of groupings. However, Bermuda’s code is based on the Harmonised Commodity Description and Coding System established in 1988 by the World Customs Organisation. It’s an international standard for classifying goods used by customs organisations worldwide. Although the Harmonised System provides for countries to add additional codes, it does not allow them to have less.

So what advantages does Bermuda get from complying with the Harmonised System? Well, essentially it just lets the Government collect trade statistics that are internationally comparable. I’m sure the data enables statisticians to plot all sorts of fun graphs in Excel when stuck in the office on a rainy afternoon, but is it worth the administrative burden it places on both Government and businesses? Not to mention unsuspecting new immigrants?

I seriously doubt it.

Comments

[Tiger Bay on 10.02.05 at 08:17]

Retailers pay duty when items are imported not when they are sold. This makes it unattractive for them to maintain inventories locally.

Duty free warehouses?

[julian on 10.02.05 at 09:39]

I brought in a container full of my worldly possessions last summer. The shipping agent made it quite easy by only providing 40-50 categories on their own form. I had to have a detailed list for insurance purposes anyway, so it wasn't too bad. The hardest part is trying to make an estimate for how much something you bought 2 years ago is worth. As long as you're reasonable, they probably won't even open the container.

[Martin on 10.02.05 at 11:06]

Over and above what Limey has said, and the comments posted, the thing I hate most about the whole system, is the degree of 'apparent discretion' that is often applied to incoming goods.

I have imported CD's from the UK, and not paid tax. I have imported DVD's from the US, and I have paid duty.

My colleague has recently 'imported' his household contents from the UK, and was told to calculate the value based upon the $ they would realise if the goods were sold in Bermuda. On Emoo? Heaven forbid.

[Smiths on 10.02.05 at 11:26]

I've brought items worth no more then $50.00Cdn, and been told by the 'customs' officer that all I owe is $25.00US...because I was "over the limit". I wasn't over the limit, and the 'officer' didn't take into account the exchange rate...but I guess he needed to 'get off' on some folke there for a visit.
Yet another reason why Bermuda is not a destination spot anymore....things like this get around.

At one time, people would say "Bermuda...what a beautiful vacation spot", now they say, "What a rip off".
Good luck Bermuda.

[Paul on 10.02.05 at 14:53]

Ah death and taxes! Nobody likes them ! :)

[Fraz on 11.02.05 at 08:06]

Smiths: what exactly does Bermudian import tax have to do with the island's ability to attract vacationers?

[bermuda bulldog on 11.02.05 at 10:11]

"Yet another reason why Bermuda is not a destination spot anymore....things like this get around."
Smiths.... there maybe many reasons why Bermuda is suffering as a tourist spot, but I doubt that customs duty/customs officers being dishonest is one of them.

I have had many visitors from Canada and the U.K and I have honestly been surprised how many of them were given "breaks" by customs officers (they were only a couple of dollars over their allowed limit), and told to "enjoy their stay in Bermuda".

The only instance I have ever heard of anyone having to pay 50% duty on goods brought into the island was when they were found to be in possesion of "undeclared goods"....perhaps this was your case ??

[Smiths on 11.02.05 at 12:12]

"perhaps this was your case ??"

I stated my case above and didn't leave anything out, you shouldn't be so arrogant as to assume I did.

I was visiting the island, as a visitor.I declared everything, I was not over the limit. That was not the first instance.

Bulldog, Does your ancedotal evidence trump mine?

[Point on 11.02.05 at 12:57]

Smiths

Are visitors able to take advantage of the duty free allowance (for items other than booze and cigarettes) ?

[The Limey on 11.02.05 at 13:11]

Visitors to Bermuda are entitled to a $30 duty-free gift allowance. More information is available here.

[Geoffrey on 11.02.05 at 13:41]

I thought that your column in yesterday's RG was right on. Nearly everything sold in Bermuda is imported and therefore is subject to the HM Customs declaration process. The present system, and tariff, is extremely cumbersome and time consuming; particularly for small importers. The use of this detailed tariff provides no useful information. 10 to 20 broad categories of tariff items would suffice and I suggest the import statistics generated would be a lot more useful for the government and business's. It would also speed up the movement of imports and help solve some of the congestion presently being experienced on the Hamilton Dock.

To me consolidating the Customs Tariff in to a manageable number of broad category items is a no brainer - it is one way the government can make life easier in Bermuda without any downside.

[Intrigued on 11.02.05 at 15:09]

Duty free warehouse, brilliant. Would make a big difference to retailers. Too smart an idea for government to pick up on, and they would never be prepared to accept the delayed cash flow, even though it would be a one time lull.

[shipstones on 15.02.05 at 13:58]

We have a friend who left the island for three years and returned with some stuff bought in Bermuda. The most obvious being some Bermuda Cedar items!!
They had to assess their value and pay duty! I kid you not!