Government's new payroll tax, which takes effect in 10 days.

And since benefits will also be taxed for the first time, Bermudian residents with live-in help will also be taxed on the food and lodging the domestics receive, Finance Minister the Hon. David Saul confirmed last night.

The rate of the tax will be 6.5 percent, the same payroll tax rate that small businesses with payrolls of less than $100,000 must pay.

Domestics and gardeners were exempted from the former employment tax, which was combined with the hospital levy to create the new payroll tax. Now, they will only be exempted if they work less than four hours a week or earn less than $50 a week.

Tax Commissioner Mr. Brian DaSilva said yesterday that this feature of the tax had been mentioned in the House of Assembly, but "it hasn't sunk in yet.'' He agreed the tax could cause some people to recalculate the costs of their house cleaners, nannies, or gardeners, and said some might opt to trim their domestics hours to four a week.

Extending the payroll tax to cover benefits would affect a wide range of businesses, from banks to hotels, which supplied housing, food, stock options, and other benefits to their employees, Mr. DaSilva said.

The taxman cometh...

From Page 1 Talks were continuing with hoteliers and the Bermuda Industrial Union about how taxes on meals provided to hotel employees would be handled, he said.

Directors' fees will also be taxed under the payroll tax, but both Dr. Saul and Mr. DaSilva said that did not represent a change from the former tax.

The full rate of 11.5 percent applies to businesses with a payroll of more than $200,000. A maximum of four percent can be deducted from the wages of employees.

A rate of 8.5 percent applies to hotels, guest houses, restaurants, and small businesses with payrolls between $100,000 and $200,000.

Businesses with payrolls below $100,000, as well as self-employed farmers, taxi drivers, fishermen, and others, will pay a rate of 6.5 percent. So will the Bermuda Hospital Board, the Corporations of Hamilton and St. George, and educational, sporting, cultural, or scientific employers.

Registered charities, churches, approved schools, and parish councils will pay a four percent rate, while the Bermuda Government, Government boards, and Bermuda College will pay 3.5 percent.