Government's doubling of the foreign currency purchase tax (FCPT) from 0.5 to one percent will create extra costs that will end up being paid by consumers.

That is the view of Jim Butterfield, president of food importer Butterfield & Vallis, who says the increase will cost his company around $350,000.

When the impact of the rise in payroll tax is taken into account, the Budget will result in Butterfield & Vallis paying more than half a million dollars extra in Government taxes, he added.

John Wight, chief executive officer of BF&M Ltd., said the FCPT rise would also have an impact on the insurer's bottom line because of the investments it makes in bonds overseas.

Greymane Construction boss Alex DeCouto told The Royal Gazette last week that the FCPT would also hit his business hard.

"We buy millions of dollars of materials and equipment from overseas every year, and this will be another increase in cost right when I am cutting margins in order to get work," Mr. DeCouto said.

Finance Minister Paula Cox's Budget for 2010/11 projects that Government will raise $29 million from FCPT, compared to $14.5 million the previous year.

"Payroll tax is in your face and everybody understands how the increase affects them," Mr. Butterfield said.

"The foreign currency tax increase is more subtle, but it means the community is being asked to find another $14.5 million."

Mr. Butterfield said that while he understood the need for taxes, he and others in the business community would have appreciated seeing Government trimming its budget and coming up with a plan to reduce its debt levels.

"Like many businesses, we will be cutting back, because we have substantially less revenue, because the hospitality industry, which is a big part of our revenue, is down 15 percent," Mr. Butterfield said.

There was no evidence of Government cutting back, after years of "frivolous spending" during better times, he added. "They are saying: 'We are going to spend our way through this'," Mr. Butterfield said. "Why is Government behaving so differently from households and companies?"

Higher costs were likely to be passed on down the line to consumers Those who pay for anything in foreign currency will be hit by the increase in FCPT, from construction companies shipping in huge quantities of steel, to individuals using Bermuda dollars to pay their credit card bill after a shopping overseas.

It also impacts companies that make profits in Bermuda and invest those profits overseas, such as insurer BF&M Ltd.

"A lot of the profit that we earn gets reinvested in foreign-denominated bonds," said BF&M CEO John Wight. "Fixed income securities like bonds are well suited to backing policyholder liabilities because they are less risky than equities and have a more reliable payout of interest.

"As there are very few issuers of bonds in Bermuda dollars we look overseas to acquire these investments."