Amendment Act.

Opposition demands to know what an extra $7 million to be raised from land tax this year will be spent on went unanswered in the House of Assembly on Friday.

United Bermuda Party MPs went on the offensive over the tax, which the Government increased earlier this month, claiming it broke Progressive Labour Party promises not to raise new taxes.

But the Government defended its actions, saying it was only bringing up to date legislation that the UBP had neglected.

The accusations came as the House of Assembly passed the Land Tax Amendment Act 1999, which will increase many land tax bills but offer reductions to others.

Finance Minister Eugene Cox , in introducing the bill, said Government had done much to lessen the blow to householders and had raised relief for pensioners.

And he slammed the UBP for letting the annual rental values go unreviewed for ten years.

He said his department had received calls from people who were pleased the review had taken place, adding that defering the matter would have made matters worse.

And he said Government had only tackled one year at this time, and would re-visit the issue in the future. In addition, residents have six months to object to the new rates.

"We believe the actions we have taken will result in a fair and equitable burden,'' he said.

The bill means homes with ARVs above $28,000 will see rises, with decreases for 75 percent of homes.

The tax rate goes from 1.5 percent to 22 percent, depending on the ARV band -- with those in the higher bracket having a 60 percent discount on the total.

Shadow Finance Minister Grant Gibbons said it was extraordinary that there was going to be a 25 percent land tax increase, so soon after February's Budget.

"Most of us remember the Finance Minister who said he would not raise taxes.

And three to four months after he is doing a 180 degree turn,'' he said.

Dr. Gibbons, who said the impact would be felt across the community, said the episode raised questions over the credibility of the Minister and his position.

He said the public was naive if it believed there would not be an impact on them. The tax would also hit the cost of living, affecting the entire community, he said.

And Shadow Minister of Legislative Affairs John Barritt said: "Where is the money going? Perhaps revenue is falling behind expenditure.

"I think the country deserves an explanation. It is not good enough to say some people are going to get a reduction.'' He said the percentage tax rate on each housing band did not have to go up just because ARVs had increased.

"Don't hide behind it,'' he said. "If you keep the tax neutral, the Minister could make adjustments at the next Budget. Why we have to have it now, I don't understand.'' And he added that it also raised concerns when the bill had been brought forward whilst a Government wide tax review was ongoing.

The new land tax system would "hurt people in the middle'', he said.

He did research on properties in his Devonshire South constituency and found that because of increased ARVs, some seniors were now having to pay tax of $800 when before they paid nothing.

He said that whilst certain people were paying less tax, most people were paying more.

He also stressed the trickle down effect of the tax, saying that people so affected would simply find a way to pass on the increase by way of increased rents.

PLP defends land tax revisions Commercial properties, he said, were not getting any breaks. One business in his constituency was facing and increase of $11,370 in its land tax bill.

When challenged by members of the Government as to the basis of his figures, Mr. Barritt held up a schedule he obtained from the Land Valuation Office and said that the information was publicly available.

He said that businesses would pass on the tax burden by increasing the price of its goods or by laying off people. This in turn will cause workers to ask for increased wages to meet the higher prices.

Mr. Barritt said that the Government was taking 6 to 7 million dollars out of the economy for what? Attorney General Lois Browne-Evans asked: "See if you can guess.'' Transport Minister Ewart Brown answered: "We are working on a wonderful plan for the Country.'' Delaey Robinson (PLP) said the bill was just another example of the current administration having to clean up the mess left behind by the UBP.

He said the review was of an existing tax and shifted the tax burden to the ability to pay.

"Their Government created the mess by not carrying out the review,'' he said.

"Who is responsible for that, Grant Gibbons.'' Environment Minister Arthur Hodgson said the previous Government had put the land tax system in place and it was therefore "sheer hypocrisy'' for the Opposition to make its comments.

He said that the Government had promised not to increase taxes and it hasn't saying that paayroll tax and Customs duties remained the same and that the tax levels imposed on the five bands of ARV for properties had decreased.

"We helped everyone,'' he said. And he added that the failure of the previous government to revalue properties every five years as set out in the legislation had caused "upheaval'' in people's lives.

He added that as the value of a property changes, the tax paid must change with it.

Mr. Hodgson acknowledged Government's best efforts may not guarantee that it had its numbers right, which was why objections to the valuations were being accepted.

To the question which was often repeated by members of the Opposition, "Where is the money going,'' Mr. Hodgson said a person paying tax does not ask this question and "it is a stupid question''.

He said the end result of the new taxes was that 75 percent of people ended up paying less.

Mr. Hodgson said the Opposition would do better to deal with "real issues'' rather than take "political points'' during the debate.

Erwin Adderley (UBP) made the point that the last two of the five bands in the tax system were carrying the burden of raising the $6-7 million.

And he said that 37 percent of homes in Bermuda fell into those top two bands.

He added that it was assumed that these homes were occupied by the rich but this was not in fact the case. Many ordinary Bermudians who had built their own homes were facing the increased taxes, people who were land rich but cash poor, he said.

He said that these people might be able to swallow these increased taxes if they knew where the money was going.

Patricia Gordon-Pamplin (UBP) reminded the Government that they said they would not play Robin Hood, taking from the rich to pay the poor. "But we don't believe it,'' she said.

She said it would make more sense if Government expressed the tax in real terms rather than referring to tax based on a percentge and then giving a discount.

She said certain people were paying a lot more in tax and she was concerned about those on whom the burden fell.

In particular, she was concerned for the elderly. She said the increased exemption did not help them if their tax bill was significantly higher.

And she wondered whether these new proposals were just the thin edge of the wedge.

What will happen next, she asked. "Will the discount decrease or perhaps a premium will be levied?' Ms Gordon-Pamplin said Government was showing that it did not necessarily care about people and that seniors were not getting the relief they were entitled to.

Mr. Hodgson pointed out the relief for seniors had been raised from $20,000 to $30,000, and those over 65 could apply for relief. In addition, anyone experiencing hardship can ask the Tax Commissioner to look at their case.

Alan Marshall (UBP) wanted to know why Government needed to raise this money so soon after the budget.

He stated that in November 1998 there was a $54 million current account surplus. He reminded the Government that in the Throne Speech, they promised to raise revenue by expanding the economy, not from new taxes.

Mr. Marshall said the voters who decided to give the PLP a chance had been "duped''. The reality was that since the election, Government spending had increased and the government was now abusing the trust of the people.

He said that this amounted to arrogance. He remembered that in a previous session, members of the Government had said: "We have the numbers to be arrogant.'' If they did not mean this as they claimed, they should not say such things in the House.

Mr. Marshall was concerned about the impact the increased taxes would have on small businesses which might have to lay off workers or even go out of business if they operated in a particularly competitive industry.

He said consumers would have less money to spend and that economists knew that less spending indicated the start of a recession.

Mr. Marshall said the Government would do beter to concentrate on closing some of the business opportunities left to them by the UBP government such as the development of Morgan's Point and Daniel's Head.

He added that Government was losing no time in finding Bermuda's wallet and that the public could see that it was going to be a tax-and-spend government.

Development and Opportunity Minister Terry Lister said that the Government had to increase land tax because it wasn't done by the previous government when it should have been.

He said that the money would be used to build a new Bermuda and claimed that people had spoken to him in the street and told him they were pleased with the changes.

He said comments that the rental market would be out of control as landlords sought to offset the increased tax were wrong because the rental market was already out of control.

This, he said , was the fault of the previous Government. Housing Minister Nelson Bascome now had the responsibility for saving the problem, he said.

Home Affairs Minister Paula Cox said the Government had to be realistic to raise funds to pay for its programmes, adding that the actual increase was $1.9 million in tax.

"We would like to run our programmes without ever having to come back to the people of Bermuda for money. But that is not reality,'' she said. "The UBP needs to realise you cannot tiptoe around these economic realities.'' She said the issues of credibility and trust were non-issues.

Dr. Gibbons asked why commercial rates had not decreased in the same fashion as residential taxes.

Mr. Cox replied businesses were more able to absorb rates, adding that the whole process had bought the Government some time to review the whole situation.