Amendments to the Payroll Tax Act will also put exempt businesses on the same footing as domestic businesses, said the spokesman, in a bid to remove Bermuda being fingered as a tax haven.

He said: "Several international organisations have focused their attention on international financial centres with scrutiny specifically centred on tax incentives or preferential tax regimes that are designed to attract international companies.

"Bermuda must be sensitive to the concerns of the world's major economies on which we rely for our economic wellbeing. To this end the Payroll Tax has been amended to remove most of the provisions that could attract international criticism and to reduce the threat of coordinated action that could damage our international business sector.'' The Payroll Tax initially permitted exempt undertakings to either pay the standard rate based on an assumed remuneration or on the actual remuneration paid.

This option has been removed and they must all pay the standard rate of 12.75 percent. They will get the $2,400 credit per employee each year and be allowed to cap individual employees' salaries at $250,000 when calculating the tax.

They will not be permitted to claim preferred rates of tax as set out for classes of employers so they will not benefit from the small business deduction.

These amendments have been made after careful consideration and consultation, the spokesman stressed.

"The Government is aware that without some relief for firms with executives receiving internationally competitive compensation, the effect of this change could be an unreasonable large increase in the amount of Payroll Tax paid by some exempted undertakings,'' he said.

"To ensure that exempted undertakings are not unduly burdened the taxable remuneration for any one employee is capped at $250,000.'' The spokesman noted that having all exempted undertakings reporting actual remuneration for Payroll Tax purposes required a few other minor amendments to the Act.

"The Tax Commissioner will have the authority to examine the payroll records of exempt undertakings that pay the Payroll Tax. Previously the Act provided this authority to the Tax Commissioner only for those exempt undertakings that chose to base their payroll tax on actual remuneration, he said.''