The Bermuda Democratic Alliance claims that Government's payroll tax revenue increase does not reflect what is really happening in the business sector and called for a full explanation.

The Royal Gazette yesterday reported that payroll tax revenue climbed eight percent to $91.6 million for the second quarter of 2010 - the highest figure for at least five years - as disclosed in the Department of Statistics' Quarterly Bulletin of Statistics.

But Michael Fahy, BDA chairman and finance spokesperson, said the figures did not paint the full picture as payroll tax itself had risen by about 15 percent.

"The statistics don't tell the whole story and in fact are a cause for concern," he said. "Payroll tax revenue went up eight percent despite the fact that in real terms the payroll tax rise was about 15 percent especially since the income threshold was raised.

"Thus revenues should also increase by a similar amount. Does this mean that the taxable base is decreasing? It could be that there have been so many cut backs and lay-offs that the tax base has shrunk, or there have been so many highly paid executives moving overseas that it has reduced the taxable income base. An official explanation would be very useful."

Mr. Fahy also raised concerns over the wisdom of the hefty payroll tax rise in the current economic downturn.

"In addition during the midst of an economic downturn the fact that this is the highest payroll tax receipt in five years just does not make good economic sense," he said. "It represents a tax and spend approach which is just not prudent. What is perhaps the worst is that there was a decline of 27.9 percent in the hotel and restaurant industry, demonstrating again the complete over reliance on the international business sector to sustain our economy.

"Expansion of industry is needed and an increase in entrepreneurship to expand the tax base."

Meanwhile as the value of new construction projects started also dropped to its lowest level for five years in the second quarter, according to Government statistics, Andy Pereira, president of the Construction Association of Bermuda, said he does not foresee any big new projects in the next six months to a year.

"Recent government statistics are not a surprise as there are only small renovation jobs available and no large projects have started in the last six to 12 months," he said.

"Construction is always driven by the overall health of the economy. I don't see this changing in the next six to 12 months unless international business brings new people onto the Island spurring the residential and commercial market or the hospitality industry can drive the much anticipated hotel developments.

"The KEMH redevelopment project is a big job and will contribute to providing jobs for the local construction industry, but one large job will not provide for everyone."