Government is to bring forward the introduction of payroll tax relief to some unspecified date before January 1 - essentially accepting a plea from the United Bermuda Party in its Throne Speech reply to help businesses in this current quarter rather than delaying relief until the next quarter.

MPs last night passed a bill to give payroll tax relief to businesses worth a total $2.4 million to help them through the current economic hardship with Government tabling an amendment to bring the date forward.

Speaking in the House of Assembly yesterday, Finance Minister Eugene Cox said the relief to retail, restaurants and small businesses would be worth a total of $2.4 million, which he said broke down to $200,000 per week.

Mr. Cox said the bill would provide "significant savings - for businesses - during the winter period." The relief was something he called a benefit to employers, but also employees as it would sustain employee's employment. But the UBP said the sum was too little too late.

The bill, which is titled the Payroll Tax Rates (Special Provisions) Act 2001, was tabled in the House earlier this month. It proposes reductions in payroll tax for retailers, restaurants and small businesses. The Bill is an amendment to the Payroll Tax Rates Act 1995.

Mr. Cox, at the bill's second reading, said the bill was designed to facilitate and accommodate economic hardships from September 11, with a temporary lowering of the payroll tax rates.

Mr. Cox spoke of the US as being Bermuda's trading partner and said the US was considering a stimulus to spark a consumer led recovery, but he cautioned that economic recovery was not expected until the third or fourth quarter of 2002, which he added would have a short to medium-term affect on local business.

The proposed relief would see rates drop, for some businesses, to as low as half a percent of payroll amounts.

But Opposition leader Dr. Grant Gibbons broke the reduction down to actual savings for employers. Dr. Gibbons calculated that with an annual payroll of $100,000, there would be a business savings of less than $40 per week.

"Does this Government really think this is going to save jobs, for a business that is on the brink? Everything helps but this does not have much impact," he said.

Dr. Gibbons also questioned how the reduced taxes would be filed: "Payroll tax forms become more complicated each year. How will businesses deal with this? Businesses are a lot leaner these days - if forms are more complicated, some businesses may say it is not worth it."

UBP colleague Tim Smith went one step further and asked if the payroll tax relief would serve to keep shops open: "Will storefronts on Front Street, Reid Street, Court Street, be fronted with glass or plywood," he asked, and called the measure "woefully inadequate".

But, a number of Mr. Cox's Government colleagues - including his daughter, Minster of Education Paula Cox, jumped to the Government's defence.

Ms Cox said: "We are helping those who are feeling the pinch. Any Government would like to wave a magic wand and give an economic honeymoon, but a prudent Government approach recognises you have to deal with a cataclysmic event and you have to temper your course very carefully. I would like to applaud the Minister," she said. The Bill's reduced tax rates are targeted at employers, while the maximum employee deduction remains at 4.75 percent of payroll.

The Bill gives a two percent drop, in the payroll tax rate on total annual payrolls of less than $100,000 - to 5.25 percent - from the regular rate of 7.75 percent.

Employers who fall in to this category will be allowed to deduct up to the maximum of 4.75 percent from employees, leaving them with a half percent employer's contribution.

Meanwhile, employers who have total annual payrolls of $100,000 to $200,000 will also see a break of 5.25 percent on the first $100,000 of payroll while the balance of payroll will be subject to the rate of 7.75 percent.

The normal taxation rate for this group is 7.25 percent on payroll below $100,000 and 9.25 percent on the balance, which is not to exceed $200,000 in total.

And employers with annual payrolls exceeding $200,000 will also see relief. These businesses stand to see a five percent drop from the existing rate of 12.75 percent to the temporary rate of 7.75 percent.

Also to benefit are taxi drivers - who qualify as self-employed persons, and currently pay a flat annual rate of $1,500 should see a break in the region of $270.

In order to benefit from the rate drops, employers and self-employed persons must not be in arrears on payroll tax remittance, beyond two tax periods.

This clause however drew fire from within PLP ranks. Backbencher Arthur Hodgson said: "Most of our tax system needs repairs. Many people in business are making money, but there is no distinction between them and those who are losing money. One has to go to the reason (businesses) are in arrears. What we really need is a tax reform that looks at ability to pay and not punish them for inability to pay. When people are in over their head, you have to help them out. We have to stop punishing people because they are poor. Equity should be the core of the tax system, not convenience of administration," Mr. Hodgson said.

But, fellow backbencher Delaey Robinson said the application of tax relief was an indication of "twenty-four, seven thinking" and Government's willingness to act "in the eleventh hour".