An increase in payroll taxes was approved by the House of Assembly early yesterday morning following a fierce debate on the state of the economy.

The Payroll Tax Amendment Act increased payroll tax from 14 per cent to 14.5 per cent and rolls back some of the payroll tax exemptions in the hospitality sector as part of a revenue-building effort by the OBA.

Detailing the legislation, Finance Minister Bob Richards said since the payroll tax relief was implemented, Government has forgiven a total of $121 million in taxes.

Marc Bean, Opposition Leader, said that it was a mistake when the PLP raised payroll tax, and it is a mistake for the OBA to do it now, adding that lower taxes would increase revenue.

“It’s about raising taxes, and raising taxes on the thing we need the most. Employment,” he said. “You are putting the green light up for further job losses. It’s counter productive.”

He called the OBA a “rudderless ship” which refuses to change course, while Shadow Finance Minister David Burt challenged the claims of incoming foreign investment, arguing that neither America’s Cup nor the new airport terminal amounted to foreign investment and the Government had guaranteed the development of the Morgan’s Point hotel project.

“[Mr Richards] hasn’t taken one bit of responsibility for the fact that the economy is weaker,” he said. “What he has said is that it’s the PLP’s fault.”

He said he was attacked last year for suggesting rolling back payroll tax relief, saying that Mr Richards decisions in the last budget have resulted in higher taxes for everyone in the new budget.

“If you raise taxes and cut productive spending, you will make your economy weaker,” Mr Burt said. “So said, so done.”

Mr Richards said: “We went out of our way to consult with our industry partners. The reason their [the PLP’s tax hike] did not attract a great deal of acceptance is because, unlike when the other side raised taxes, we not only consulted but explained the situation so they understood the predicament we were in and how important it was to break the deficit. It indirectly affects them and they know that. There was an acceptance. Also they accepted it because they saw the Government was making efforts to reduce its expenditure. When PLP blindsided them with a tax increase there didn’t seem to be any attempt to slim its size and cut the fat – they were being asked to finance the fat. That’s what they found difficult to swallow.”

Culture Minister Patricia Gordon-Pamplin addressed the Opposition saying: “If you would just admit you were wrong when you raised the level of deficit and went on the drunken sailor spending spree that is forcing us to levy a higher degree of tax on our people. I recall when payroll tax [under the PLP] went from 14 to 16 per cent announced in the budget with no consultation and we had a mass exodus.”

Mr Richards added: “We are proposing to raise the payroll tax by a half a per cent.

“When you hear the rhetoric it bears no proportion to the amount we are trying to raise this tax it is a small rise – and deliberately so.”

Despite Opposition, the legislation was passed by the House, along with increases in departure tax and land tax for commercial properties.