Pre-Budget debate on how payroll tax should be treated following Government's receipt of $20 million more than expected in the last fiscal year reached a middle ground yesterday.

Reports that the Chamber of Commerce's International Companies Division (ICD) head David Ezekiel was renewing calls for Government to reduce the tax burden for international businesses - by lowering the payroll tax cap from $225,000 - came under fire from MP Trevor Moniz.

Mr. Moniz said lowering the reporting cap was “unequitable” as it favoured the international business sector and called for a lowering of the tax rate “across the board”.

The debate followed Government's move two years ago to bring international and local companies in line with reporting on actual salaries up to a cap of $250,000. Previously payroll tax reporting for upper income earners was based on a notional salary amount of $70,000. The cap has since been lowered to $225,000.

Mr. Ezekiel yesterday responded to Mr. Moniz comments. “Mr. Moniz has said that if there is to be any reduction in payroll taxation it should be ‘across the board' and not favour the international business sector.

“Mr. Moniz is entirely right in his assertion that a reduction of the salary cap will mainly benefit international companies, but it is these companies which saw the quantum increases in their payroll tax bill when the basis was changed.

“We have shown that the international sector saw an overall increase of some 37 percent in one year, with some companies seeing increases of 131 percent, 151 percent, 153 percent and 171 percent. It is for this reason that we have concentrated on the salary cap as a method of relief. We have provided all this data to Government.

“Having said this, a reduction in the overall tax rate which would benefit both local and international companies is more than acceptable to us.

“We are looking for relief for our members from the inordinate increases resulting from the change in basis in 1999, and will take it in any form it comes. So we have no issue with Mr. Moniz in his call for an ‘across the board' reduction,” Mr. Ezekiel said.

Mr. Moniz, who has said that he is not “anti-international business,” but would like to see equitable taxation, responded to Mr. Ezekiel's comments by saying: “I am pleased to see there is common ground on my suggestion that there be a reduction across the board.”

Mr. Ezekiel did however reiterate that international companies have found it difficult to bear the large tax increase: “I would also like to clarify our position on the salary cap, initial determination of which was always going to be a difficult proposition given the lack of information available to Government.

“Our position however is that once the initial returns to Government showed that businesses, mainly in the international sector were being hard hit then changes should have been made.

“While international companies are more than willing to make a significant contribution to the Island's economy, the sector consists of individual companies who like any other businesses cannot readily absorb double and triple-digit percentage increases in large expense items,” Mr. Ezekiel said.