Amendments to payroll tax rules to tackle notional salaries were approved in the Senate.

Justin Mathias, One Bermuda Alliance senator, expressed concerns the changes would negatively impact those in small and medium sized businesses.

But the legislation won the support of independent senators who allowed it to pass without further amendment.

The Payroll Tax Amendment (No 2) Act, tabled by Progressive Labour Party senator Vance Campbell in the Senate, introduces payroll tax relief for some new employees — a move intended to encourage increased employment.

The act also addresses notional salaries — a loophole that enables self-employed persons and “deemed employees” who earn their income in whole or in part through a share of profits to declare less than they actually earn for tax purposes.

But dividends related to shares in an exempt undertaking and any dividends relating to shares from a company listed on the Bermuda Stock Exchange are not covered by the amendment.

The change is expected to raise around $10 million for the Government annually.

Mr Mathias however said the amendments were too broad and would harm smaller businesses.

He also raised concerns about what the amendments would do to the island’s international reputation.

Mr Mathias said: “Those who wish to not see this country succeed will look at this and say it’s preferential tax treatment.

“I believe in the reputation of this country. I believe on the business we do in this country and this gives me grave concerns.”

Mr Mathias also raised concerns about the retroactive nature of the bill, which has a commencement date of April 1, 2018.

He said he supported the relief included in the legislation, but suggested the Government should give additional resources to the office of the tax commissioner to address notional salaries.

Mr Mathias tabled an amendment that would send a message to the House to remove the clause covering the change to notional salaries, but the amendment failed.

All three OBA senators voted in favour of the amendment, but all three independent senators and the four PLP senators present in the Chamber voted against it.

Jason Hayward, PLP senator, was not present

James Jardine, independent senator, however voiced his support for the bill and described the debate as a “rehash” of the previous debate on payroll tax amendments.

Mr Jardine said the bill will provide some payroll tax relief for small businesses.

He added: “I take the point about how the outside world will view this, but I think the outside world will take into consideration the Government has a tax reform committee running.”

Anthony Richardson, PLP senator, said: “In the Bermudian context, we have to be prepared to pay our fair share.

“The amendment does just that.”

But he added that people will try to find away around the legislation, which will result in additional amendments in the future.