Payroll tax for retail businesses will be lifted for the next six months in an effort to support the struggling sector.The change comes into effect today and continues through March 31. It was one of several initiatives announced by Premier Paula Cox at a press conference yesterday.Duty rates on goods declared at the airport by returning residents will increase from 25 percent to 35 percent, and travellers’ allowance will be restricted to one person per household. A government spokesman was last night unable to confirm if this increase would affect those who are already overseas and scheduled to return to the island from today onwards.“In these circumstances, leaders must act in the best interests of their countries,” Mrs Cox said. “We must act to preserve the basic well being and welfare of our people. Deficit reduction is a medium to long-term strategy. Employment that is related to family income is an immediate problem that must be addressed right now.“Although most economists will tell you these problems will resolve themselves in the long run, right now you and I cannot live in the long run.”Retailers yesterday applauded the move but Shadow Finance Minister Bob Richards described it as a “Band-Aid” rather than a plan. He said the changes do nothing to address the real issue a declining number of visitors and international businesses leaving the Island.The OBA MP said Mrs Cox’s announcement “was clearly a reaction” to two headline makers this week, Citi Fund’s relocation and the impending closure of Willowbank hotel. He said it had “all the hallmarks of panic”.“We have absolutely no objection to the suspension of payroll tax to people in the retail sector, but that is not solving the problem. Temporary tax relief is not enough.“The retail sector isn’t suffering because Bermudians are spending their money overseas, they’re suffering because of the falling number of tourists and the falling number of international business people on the Island.“There’s no evidence of a plan to get more tourists to come to Bermuda or to get international business people to stop leaving Bermuda. The best way to help retail is to fix the economy”.Mr Richards added that retailers should be allowed to pay duty after goods had been sold to improve their cash flow and the duty rate should remain at 25 percent as the increase was “punitive and coercive”.He also questioned if the Government had the legal authority to change duty rates without first taking the matter to the House of Assembly.Mr Richards said: “The announcement reflects a government floundering. It has no plan, no direction and no meaningful answers, other than to say that all these woes have been caused by the evil outside world”.Finance Minister Mrs Cox said lifting the payroll tax for the retail sector would result in the net revenue shortfall widening by $3 million to $5 million, but would help to support 4,000 Bermudians employed in local stores.She said that although the 2011/12 Budget was written with a focus on deficit reduction, it was based on the belief that the global economy would see a slow, sustained improvement which has not materialised.The relief comes after more than three years of steady decline in retail sales figures which have left many businesses struggling to remain afloat. Chair of the Retail Division of the Chamber of Commerce Paula Clarke said her members were delighted that payroll tax had been temporarily suspended.“This will have an immediate benefit and provide some much-needed relief to the struggling retail sector,” she said.“Although this is a short-term measure, we are thankful that the Premier is listening to our concerns and putting into action a fair initiative that will benefit all retailers, regardless of size.”Ms Clarke, who is also the chief executive officer of Gibbons Company, said the increase in duty could help to change overseas spending habits and raise revenue for Government.“In this time of recession and growing unemployment, it is essential that we keep Bermuda dollars circulating Bermuda and not have it drain out to other countries,” she said.Bermuda College economy lecturer Craig Simmons agreed that the temporary tax cut was a move in the right direction but said the six-month time frame was too short to make a real impact.“A minimum time frame for a tax cut to have substantive impact would be two years,” Mr Simmons said. “A rough estimate of the cost [of the six-month cut] is $8.6 million which will raise Government debt by less than one percent.“If we assume a spending multiplier of, say, 1.5, than the tax cut should increase GDP by fewer than $5 million in an economy with a GDP of more than $5 billion.”He said the increase in duty, while in keeping with recent Buy Bermuda campaigns, would not likely yield a significant increase in tax revenue.According to Mr Simmons, the move should raise around $3.4 million assuming that overseas spending remains constant. Mrs Cox also announced that Government would provide a guarantee for the West End Development Corporation so that it could proceed with its low-cost housing project at Ireland Island.That project should provide in excess of 100 jobs at various times, she said.The Premier advised those who have already lost their jobs to contact the Department of Labour and Training, which will offer retraining programmes for those seeking to learn skills.More than 400 jobs have been lost across the Island so far this year.Mrs Cox said that the most recent unemployment statistics suggest the Island is experiencing five to six percent unemployment.And she said that Government is looking at the possibility of expanding financial aid to persons who own homes.Overall, she said the Government’s strategy in dealing with the economy is one of repair, reform, rebalance and rebuilding.“Repair what needs to be done now to sustain businesses and help people’s pockets with short-term temporary relief is good,” she said.She continued: “Reform is also speaking to the future the temporary measures will provide time for businesses to consider innovative and new ways of developing and growing their market base.“Rebalance is getting fundamental economic relationships back in sync as we move towards recovery. It also speaks to opportunities for diversification by moving to green technologies. Rebuild providing businesses and people with opportunities to build a new platform for moving forward fiercely with confidence.“The path is clear. The time is now. We must act. We have to act now and see results. That is the aim of the temporary rescue measures announced.”