A new tax on services will increase costs to consumers and may need more civil servants to administer it, Chamber of Commerce president John Wight warned yesterday.

Mr Wight said the new general services tax, likely to be set at 5 per cent, was “a necessary evil” but that it was difficult to make a clear assessment of its impact until more details were available.

He added: “While such taxes can be powerful generators of revenue for the Government, the Budget estimates that the GST, after related costs, will eventually give the Government about $50 million per year.

“However, they will also create inflation in the cost of services to the consumer and potential addition of jobs to the civil service.”

And Mr Wight said: “Although there are no clear definitions of which companies and which services will be in or out of the tax net for the GST, it appears that medium to large-sized local businesses will bear the brunt of it — companies that make up a large of the Chamber of Commerce membership.

“While businesses are still attempting to recover from a downturn that for many began more than five years ago, the prospect of a new tax is not a welcome one.

“However, the Chamber does recognise that the Government has few options to raise the funds needed to address its serious financial shortfalls.”

Mr Wight was speaking as Finance Minister Bob Richards, who announced the new tax in February’s Budget statement, launched talks with the Chamber on the implementation of the new tax, set to come into force next April at the earliest.

Mr Wight said: “The Minister has informed the Chamber that he wishes the Chamber to have input into the general services tax design and implementation.

“We very much look forward to this collaborative process to support both the Government and Bermuda businesses.”

Mr Richards said in February that banking, insurance, healthcare providers and small businesses will be exempted from the services tax.

He added that Bermuda needed to broaden its tax base to balance Government’s books and cut down the island’s $2 billion plus debt.

Mr Richards said the delay in implementing the tax was due to “significant adjustments” needed for both service providers and Government, which will have to ensure proper enforcement of the tax.

The Bottom Line business magazine, due out at the end of this month, will feature an article on the new tax.