Controversial payroll tax increases were passed by the House of Assembly last night, with the United Bermuda Party warning they could trigger the departure of international business.

MPs voted in favour of a payroll tax rise from 14 percent to 16 percent, and more than doubling the salary cap from $350,000 to $750,000, with full support from all Progressive Labour Party MPs present.

Finance Minister Paula Cox insisted international business understands Government needs money to tackle key issues such as education and security.

However, the UBP made one last attempt to stave off the move; Shadow Finance Minister Bob Richards and his predecessor Patricia Gordon-Pamplin both complained how local and international business, the public and unions all believe it will hit them hard.

The Payroll Tax Rates Amendment Act — which accounts for the two percentage points increase — went to a named vote, and passed by 19 to 11.

Absent from the vote were PLP backbencher Dale Butler, who protested angrily at Government's lack of fiscal accountability on Friday night, as well as backbenchers Alex Scott and Dennis Lister, and Shawn Crockwell of the Bermuda Democratic Alliance.

BDA members Donte Hunt and Mark Pettingill voted against the rise, along with all nine UBP members. Independents Wayne Furbert and Darius Tucker voted in favour, along with the remaining 17 PLP members, including Wayne Perinchief who previously spoke out against the payroll tax rise.

During a contentious debate, Mrs. Gordon-Pamplin declared she was not scaremongering, but said: "If we find that companies are feeling hard done by, hard pressed because of indiscriminate tax rises, the kind of which we are now having to approve, they decide that Ireland starts to look a little bit more attractive with their ten percent cap; Switzerland looks a little bit more attractive.

"Would the Government be big enough to say two percent is too big under the circumstances? Let's do one percent this year and one percent next year. Be big enough to say we are sensible, caring. I believe you would get a better buy-in."

Ms Cox responded that the international business sector has cited the importance of public education, so that it can have a good labour force to draw from; as well as safety and security.

"They talk about issues that have a commonality for people of Bermuda ... they feel the ends justify the means. They see there's a reason why," she said.

"It's not that money is going into some sieve. Far from it. The money is going to those issues that are relevant to residents of Bermuda.

"When you increase taxes, it's not because we want to have portraits of ourselves up here. It's not because we want to frolic. It's so we can make sure Bermuda is a safe place to live and anchor your business."

In his speech, Mr. Richards had repeated his annoyance that the Minister was blaming Bermuda's financial difficulties on the global economic crisis.

"It's a consequence of out-of-control spending," he said. "The Government has been spending without restraint for many years and during the years when revenues were strong this overspending was completely hidden, except for those of us who want to take our time to analyse the Budget book.

"Now the revenues have turned down, the consequences are obvious to all. These are that the Government needs to raise revenue because it's run out of money otherwise."

The legislation provides for tax breaks for restaurants and hotels, taxi drivers and fishermen.

Other bills passed yesterday were:

• Payroll Tax Amendment Act, which raises the amount of salary on which high-earners pay payroll tax from the first $350,000 to $750,000;

• Government Loans (Suspension of Annual Contribution to Sinking Fund) Order, which allows Government to resume payments into its Sinking Fund;

• Government Loans Amendment Act, which raises the debt ceiling to $1.25 billion; and

• Customs Department Amendment Act, which introduces fees for customs certification services.