Payroll tax is to rise two percent to 16 percent, Finance Minister Paula Cox announced in her Budget statement this morning.

Government has also raised its debt ceiling by 25 percent to $1.25 billion, following last year’s 82 percent rise.

The rate of payroll tax recoverable from employees will go up by one percentage point to 5.75 percent.

High earners will also be taxed on much more of what they earn, after the payroll tax salary cap was raised to $750,000 from $350,000.

Minister Cox expects the changes to reap an extra $72 million in payroll tax receipts.

A relief provision to allow retailers to pay a lower rate of payroll taxes during their slow business months of January, February and March, will be built into the changes.

Government also plans payroll tax relief for the taxi sector during the tax period starting January 2010. The relief will come in the form of rebates.

Existing payroll tax measures for the restaurant and hotel sectors will continue, while fuel concessions for fishermen will be extended through March 2012.

The rate of land tax will also increase for top-tier properties by almost one percent, to 19.2 percent.

Fees for many Government services will rise by three percent, while motor vehicles licences will cost five percent more.

Ms Cox also announced an allocation of $65.7 million to the Bermuda Police Service to combat gang-related crime and the formation of a national task force to tackle negative behaviour.

Speaking in the House of Assembly, Ms Cox described the financial turmoil of the past two years as a “one in 100 year event”.

The Budget figures showed that revenue for 2009/10 was $934 million — more than $35 million less than projected.

Expenditure was nearly $988 million, $21 million more than was planned.

For 2010/11, both revenue and expenditure are expected to total around $1.06 billion.

To read the complete version of the 2010-2011 budget click here

* Full analysis in tomorrow’s Royal Gazette.