Cutting payroll tax may help to staunch job losses but won’t necessarily create new employment, business leaders warned yesterday.They welcomed the decision by Premier and Finance Minister Paula Cox to drop payroll tax to 14 percent after increasing it by two percentage points to 16 percent for 2010/11.But Peter Everson, chairman of Bermuda Chamber of Commerce’s economics committee, said the 2010/11 hike had directly caused the loss of many jobs which weren’t necessarily coming back.He said the business community had called for the rollback in this Budget and Ms Cox should be given credit for listening.But he said her claim that the 2010/11 increase was necessary to ensure Bermuda’s credit ratings remained strong didn’t make sense.Mr Everson said the Premier was alluding to the fact she needed to prove to the ratings agencies she could raise revenue if necessary.But he said Government actually raised less than it expected to in payroll tax for this fiscal year $400 million rather than $427 million because companies needed to shed workers due to the cost of doing business.“It’s a tragedy because it’s directly caused the loss of a lot of jobs and those jobs aren’t going to return just because the payroll tax has changed,” he said.Chamber president Stephen Todd said: “We were pleased to see that the Premier and Finance Minister had taken into consideration the concerns that we had previously raised about the increases in payroll tax and has rolled them back.“However, it does come at a price, which is the negative impact that it [the 2010/11 increase] had on employers, which is the added expense, which resulted in job losses. I have to think that’s as a direct result of the increases.”Martin Law, executive officer of Bermuda Employers’ Council, said his organisation was “very happy” with the rollback.“We believe it will be helpful and it should do the trick that the Premier is intending it to do. It’s taken us to a better place than we were in yesterday. That’s the way we have to look at it.”Mr Law said it was difficult to make a realistic projection as to whether it would create jobs, as Ms Cox hopes, but it would remove the “disincentive to creating employment” of higher payroll tax.Ms Cox said in her Budget statement the rollback would lose Government about $50 million in revenue but would “return approximately $50 million of spending power to taxpayers in 2011/12”.“This was not an easy decision given the Government’s soft revenue position but it was considered the best option for injecting some stimulus into Bermuda’s economy” Ms Cox said.She insisted the 2010/11 rise was necessary given Government’s spending plans that year.“Without it, we would have risked a ratings downgrade which would have driven up the cost of borrowing in Bermuda and potentially damaged our reputation as an international business centre. However, it was never the intent for such increases to be a permanent feature of the tax structure.”Asked at a post-Budget press conference if she had made a mistake in hiking up tax in 2010/11, she replied: “Not at all, not at all.”She said Government couldn’t have pruned back spending and to have not provided a means of generating revenue would have shown a “reckless abandon”.The Premier said in her Budget statement that relief from payroll tax for the hotel sector would be extended to March 31, 2012 and there would be reduced payroll tax rate for retailers during January, February and March 2011.Customs duty relief on capital goods for various sectors, including retail, will be extended past March. Ms Cox said: “Most other tax rates will remain unchanged except for a minor change in the customs tariff and government fees, including an increase in cellular phone licences.”Mr Todd said the fact most tax rates would remain unchanged was good news, as was the absence of ‘sin taxes’ from the Budget. But he added: “We are awaiting details of those minor increases.”The cell phone licence fee will go up from $5 a month to $7.Frank Amaral, chief operating officer of Bermuda Digital Communications, explained the licence was also for wireless internet users. “I don’t know how long it’s been but it’s been a number of years since that tax was increased,” he said.