Minister of Finance Bob Richards has defended his proposed introduction of a 5 per cent services tax next year.

In his 2016-17 Budget statement yesterday, the Deputy Premier briefly detailed his plan for a general services tax, which is scheduled to take effect on April 1, 2017, at the earliest.

“In order to broaden the tax base, the GST will be levied on turnover from the provision of most services by service providers to the public,” he said.

The new tax is expected to raise $50 million a year for the Government’s coffers, as it attempts to balance Bermuda’s budget while tackling the island’s $2 billion-plus debt.

Mr Richards added that the delay in implementing the tax is due to “significant adjustments” faced by both service providers and the Government to ensure its enforceability.

Banking, insurance and healthcare sectors will be exempt from the tax, as will small businesses. Later Mr Richards addressed the media at the Cabinet Office, where he expanded on his intentions for the tax.

“We have a service economy and we’re only taxing goods,” he said.

Mr Richards added that he was unable to offer specifics on the plan, as the consultation process was in its early stages with the Chamber of Commerce and the island’s companies.

“We’re not keeping any secrets here, and we’re not going to blindside businesses with new rules,” Mr Richards added.

“Businesspeople don’t mind bad news, but they do mind uncertainty. I think they’ll understand what we have to do, and we’re confident that we’ll come to an agreement on how to proceed.”

Michael Dunkley, the Premier, added his support for the legislation.

“Throughout the history of man, people have been hesitant and uncertain about change,” Mr Dunkley said.

“This is a drastic change we’re talking about, and the minister needs to be lauded for the consultation he has done, and the consultation he has signalled that he will do in the future.

“I think we all have to accept that if we don’t make some changes, and if we don’t deal with the reality of here and now, then we’re in trouble.”

Elsewhere in the Budget, Mr Richards announced plans to increase excise taxes on alcohol, tobacco and petrol — thereby boosting revenue by $14.7 million.

The payroll tax is also under review, with Mr Richards claiming that a “more progressive” restructuring of legislation could help lower income employees while also yielding additional revenue.