The House of Assembly last night approved an increase in payroll tax despite vocal opposition.

While Bob Richards, the Minister of Finance, said the move was a temporary but necessary measure, shadow minister David Burt said it would place an additional burden on struggling Bermudians, noting that workers will now face the highest payroll tax rate in local history.

“At the same time that you are rolling out these payroll tax increases you will note that health insurance rates, which was promised to go down under the OBA, are going up,” he added. “We also know the Minister is raising taxes on fuel, so we know prices are going to go up. The cost of living will continue to increase.

“What this Budget and this bill does is make the standard of living for people in this country worse.”

Opening the debate, Mr Richards said the 1 per cent increase was an interim measure as the government plans a wider reform of the island’s tax structure. The amendments also allows employers to increase the percentage of the fee that must be paid by the employee from 5 per cent to 6 per cent.

Meanwhile, government will continue to roll back payroll tax exemptions in the hospitality and retail industries, increasing payroll tax from 5.5 per cent to 8 per cent.

He argued that current revenue is insufficient to pay for government at its current size, so government needs to increasing revenue while at the same time reducing expenditure, adding that he believed the economy had recovered enough that it could withstand the effects of a tax increase.

However, Mr Burt took aim at the increase, saying that the people are paying for the government’s failure to listen to the Opposition. He said that he hoped the increase is, in fact, a temporary one rather than something that remains in the long term.

Michael Dunkley, the Premier, called the increase a last resort, describing it as necessary given the economic situation faced by the government.

“It’s clear that no one likes tax increases,” he said. “No government likes a tax increase. It’s the last thing that any government would like to do and this government is no different.”

Opposition leader Marc Bean, however, said the increases would lead to job losses, saying: “If there is one single decision that can destroy jobs by the stroke of a pen, it must be the increasing of taxes.

“This is a backwards step. It’s going to punish those who earn the least. It’s going to punish businesses. It’s going to punish everyone in the country for some short-term gain.”

Community minister Patricia Gordon-Pamplin expressed her support for the increase, saying that Bermuda must address the issue of the debt while it still can.

She noted that the government had pledged to move forward with comprehensive tax reform, and that she would like to see those who earn the least be able to avoid payroll tax entirely in the future.

“We don’t take heart in the fact that we have to raise this tax, but we do take heart in the fact that we are paying the bills,” she said.