in Bermuda. Incentives are to be provided bosses to hire full-time staff.

Henry Adderley reports.

Amendments to the Payroll Tax Act will support the development of Bermuda's labour market by providing incentives to employers to hire full-time workers.

They will also increase revenues from an estimated $159 million for 1999/2000 to a forecasted figure of $163.8 million for 2000/2001.

The news came from a Finance Ministry spokesman who said: "The chief beneficiaries of this policy will be those firms providing stable full-time employment to a large number of workers such as retail stores, restaurants and hotels.

"There is a concern that the general high cost of labour in Bermuda and the global trend towarda business restructuring will result in firms employing less Bermuda labour.

"These trends will further marginalise low wage and low skilled workers in Bermuda. Amendments to the Payroll Tax are designed so that the greatest incentive is provided to those employers that provide jobs to those workers that are most vulnerable.'' The Act came into force April 1, 1995, and besides small adjustments to tax rates, has remained almost unchanged since then.

Its purpose is to tax, at various rates, remuneration paid by an employer, or received by a self-employed person or deemed employee.

Remuneration includes wages, salaries, leave pay, commissions, fees, bonuses, perquisites, allowances, pension plan disbursements, termination pay, the value of meals or lodging or other similar benefits and the value element of the exercise of stock options received on account of services rendered.

The rates vary according to prescribed classes of employers and there are lower rates for employers in special circumstances.

Under the amendments to the Payroll Tax Act, the low rate band, where annual payroll is less than $100,000, will increase to 7.25 percent and the middle rate band, where annual payroll exceeds $100,000 but is less than $200,000, will increase to 9.25 percent.

The high rate band, where annual payroll exceeds $200,000, or standard rate will increase from 12 percent to 12.75 percent -- it was 11.5 percent in 1995.

Employers paying this rate, and hotels and restaurants, are granted a special relief for each of their full-time employees.

When calculating the payroll tax chargeable each quarter, these employers can treat the total remuneration paid as if it were reduced by $600 -- $2,400 per year -- in respect of each of their full-time employees.

Under the Act, a full-time employee is one who has worked at least 30 hours per week for the employer.

Other rates are charged depending on the business carried on by the employee or self-employed person or on the size of the payroll.

These rates are being increased from a range of 4.5 to nine to a range of 4.75 to 9.75 for different classes of employers.

A special rate of tax, which is increasing from seven percent to 7.75 percent, is prescribed in the Act for employees in special situations including when they are: on approved training schemes; on jury duty; on duty with the Bermuda Voluntary reserve; on duty with the Bermuda Regiment; employed as a taxi driver, farmer or fishermen; or employed in a hotel during the months of December, January or February.

The spokesman noted: "Although Bermuda's economy has been buoyant for many years, large sectors of the economy have struggled.'' Of particular concern are the hotel, restaurants and retail sectors which have been under considerable stress due to the decline in Bermuda's tourism industry.

Said the spokesman: "These sectors also provide vital employment to many Bermudians. The Payroll Tax amendments are designed to support these sectors by reducing the amount to the Payroll Tax they are required to pay.'' Hotels and restaurants will continue to enjoy a preferential tax rate of 9.75 percent year round while during the traditionally slow months of December, January and February hotels will be taxed at a rate of 7.75 percent.

In combination with the amendments proposed to the Payroll Tax Rates Act 1995, the relief provided to the retail sector is estimated to be $415,000, to the hotel sector $420,000 and to restaurants, bars and nightclubs $65,000 based on recent payroll returns.

And a certain portion of the Payroll Tax is recoverable from employees.

This year's amendment is increasing the amount that employers can recover from employees by 0.25 percent to 4.75 percent of taxable remuneration.