High earners will see more tax lopped from their pay cheques from this spring, Finance Minister Paula Cox announced yesterday.

Anyone with a top line of more than $235,000 will feel the pinch of a salary cap increase in payroll tax for the coming financial year.

In her Budget statement, Ms Cox announced that the payroll tax rate would remain unchanged at 13.5 percent.

But in the 2007/08 financial year, the tax will be charged on all salary received up to $350,000 ? a significant rise from the current cap of $235,000.

For someone earning at the top end of the scale, the result will be a maximum $5,462 a year being deducted from their pay cheque.

Employers will shoulder the remaining $10,000 or so of extra tax.

The most payroll tax that can be deducted from an employee?s salary is 4.75 percent, while the employer must pay the remaining 8.75 percent. The employer can choose to pay more, or all of it.

Government estimates it will rake in an extra $10 million in revenue from the change and intends to review the salary cap every two years in future.

The ?fat cat tax? will impact on many highly paid professionals, including international business executives.

Many of the actuaries, whose mathematical prowess underpins the booming insurance and reinsurance industry, will also be hit.

The payroll tax cap was last raised three years ago, by $10,000.

Association of Bermuda International Companies (ABIC) chairman David Ezekiel conceded the tax rise would affect many big business decision-makers but did not think it would upset them enough to leave the Island. This is clearly going to leave some people out of pocket,? Mr. Ezekiel said. ?But the international sector is doing well and people are prepared to make a contribution ? as long as they feel their tax dollars are being spent well and that they are getting the kind of resources that they hope to get.

?We are not supportive of any tax increases in what is a growing economy.

?In relation to this increase, I don?t think most businesses will really experience much of a change. And an increase at the upper level is probably more palatable than a general tax increase.?

Ms Cox promised biennial reviews of the payroll tax salary cap. ?Certainly in future reviews, we would hope not to see a quantum leap like this again,? Mr. Ezekiel said.

Minister Cox told the House of Assembly yesterday: ?The pre-existing salary cap of $235,000 provides, in effect, an exemption on the payment of payroll tax for that portion of remuneration that exceeds $235,000. This differential needed to be addressed as the real effect of the ceiling is that those whose remuneration is less than $235,000 are paying payroll tax on their entire salary with no corresponding exemption or reduction in their payroll tax bill, unlike the position for those in the higher salary bands. Accordingly on a going-forward basis, Government will address this anomaly in a reasonable and pragmatic manner by instituting a biennial review of the salary cap.?