Domestically, The Winter of our Disconnect has become taxing times in more ways than one, domestically for Bermuda residents and internationally for those with US /UK connections, doing business abroad or stepping up their pond-straddling travel plans.

The Current Domestic Tax Picture. Bermuda is often touted as a low tax jurisdiction by the global media, self-promoting politicians, and tax regime revenue authorities. How little understanding there is of the largely hidden, but every day present, cost to the residents of Bermuda in innumerable stamp duties, consumption taxes, Foreign Currency Exchange tariffs, fuel surcharges, real property and trust conveyancing taxes, estate duty fees and so on. These so-called tax duties translate, on the back of an envelope, to a 20 to 25 percent average tax on every working (and non-working) adult in Bermuda. Flat tax assessments predominate these revenue raising programs which means that those in lower income brackets absorb a disproportionately higher ratio of tax to earnings.

Are there more taxes on the horizon? With Bermuda's coffers far less full than they were due to reported in the news overconfident spending plans draining the bottom of the tide pool, will Government look to we, the people, outside the hallowed halls to fill the gap? Governments are not corporations - though they should be. If they were, they'd be managed conservatively for cash flow and aggressively for accountability. We, the equity shareholders, would have the explicit right to demand superior performance. After all, as ordinary people with ordinary working lives, we've had to demand accountability of, and be responsible for our personal finances.

The spectre of higher taxes, in any environment, is never good news. Sensible families planned ahead of this recession by trimming their personal budgets long ago. Some families have given up any extras in order to build family cash contingency funds. Other situations are more severe; the families may be barely coping with redundancies and limited cash flows. No family could possibly be the least bit amused to learn from last week's commentary that it might be considered good economic policy to raise taxes. Struggling retailers, hoteliers, restaurateurs, downsized international businesses, construction companies, and landlords, for instance, will not be receptive either, particularly if they have been prudently aggressive in controlling expenses within their own company,

Where is the cash going to come from? It is anyone's guess where and how the additional revenue will be raised. Will revenue policy raise taxes on foreign exchange, payroll, customs, stamp duty as well as implementing new taxes on dividends, rental income and other income sources? Is it possible we will see the introduction of an income tax regime?

Right now it is all speculation. We won't know until the governmental budget is announced. We do know with almost certainty the shortfall (and the debt) has to be paid by we the people and that no one will like the impact to our personal household expense plan

Then, there is the relevance thing. The question has to be asked - should we of no relevance be expected to contribute the same amount as those considered more relevant? We've been asked to be patriotic and do our duty, even though we've been informed that some of us are not relevant. And we're confused. If we are not considered relevant to the success of the country, it certainly follows that our money contributions are not relevant either. Until we receive full recognition of relevance, the new motto should be - no taxation without recognition of relevance.

Internationally, every country wants their citizens to pay their fair share of taxes. Bermuda residents with US connections will need to review their involvement in the US economy, timing and length of visits and the structure of their overseas assets for potential US taxation.

There are changes and enhanced collaboration between US federal and state tax liability collection procedures such as cross matching individual migrations from state to state or over borders, registries of deeds transactions and conveyances and statistical evaluations of lifestyle patterns.

Bermuda residents with UK connections may be facing increased scrutiny for visit timing and domicile classification. Additional planning and a review of all assets and lifestyle funding may be in order.

It is also time for annual tax planning for Bermuda residents possessing US citizenship or permanent residence (green card holders). US Internal Revenue Service announced recently that they have implemented increased audits of returns of individual taxpayers claiming the Foreign Earned Income Exclusion. IRS has also named a focused goal of reviewing claims for Foreign Tax Credits. Keeping good record documentation and filing returns on a timely basis is always recommended for minimising audit inquiries results.

Indeed, these are taxing times. After such a tough subject, and to bring some perspective back, I encourage you to go to the website www.happyhealthylonglife.com. That's what it's all about, living your best life.

Part II - next week. What might a Bermuda income tax or an interest and dividends tax regime look like?

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP- Bermuda is an international Certified Financial Planner™ practitioner. She specialises in independent fee-only cross-border tax, estate, investment, and strategic retirement planning services for Bermuda residents with US/multi-national connections, internationally mobile people and US citizens living abroad. For more information, contact martha.myrongmail.com