Premier Alex Scott and Finance Minister Paula Cox deserve credit for finally releasing the tax review after it was kept under wraps for at least five years.

But now that it has finally been released, it is not a total surprise that the late Eugene Cox, the former Finance Minister, was keen to keep it secret.

That's because the revisions to the review that Mr. Cox sought when he took office in 1998 flew in the face of the PLP's election promises.

The PLP then promised no tax increases, instead saying it would find savings through eliminating pockets of waste. And after the General Election, then-Premier Ms Smith made a still-unfulfilled promise to appoint a “scissors man” to cut unnecessary spending.

At the same time those promises were being made, Mr. Cox revised the former Government's term of reference that the review look at ways of revising the tax code but retaining taxation at around 18 percent of gross domestic product, instead saying that the cap should be raised to 24 percent.

That may not seem like much, but GDP last year was $3.9 billion, meaning that a tax increase of one percent of GDP would net Government an extra $39 million, two percent would mean $78 million and so on.

The good news is that this in fact has not happened, but Ms Cox said this week that Government would set a cap of 21 percent, and that is still a lot of money by any measure.

The mystery is why Government would want to raise the cap at all. While seeing what proportion of GDP Government expenditure takes is a reasonable measure of public sector prudence, Government's primary aim should be to raise no more money than it has to spend, thus keeping money at work in the economy and in the pockets of those who earned it.

The second reason that keeping the report secret would have spared Mr. Cox blushes was the request to look at ways of making payroll tax more progressive. Progressive taxation means, essentially, that the more you earn, the greater proportion of your income goes to taxes.

So a person earning $10,000 might pay a ten percent tax, while a person earning $100,000 might pay a 15 percent tax. Payroll tax, as it stands now, is a flat tax. Apart from those industries that are exempt, everyone pays the same percentage, regardless of whether they earn $10,000 or $100,000.

The argument in favour of progressivity is that people at the bottom of the salary scale are hurt by flat taxes. If you earn $10,000 a year and pay ten percent tax, giving up that $1,000 hurts more than the person giving up $10,000 on earnings of $100,000.

But progressive taxes are usually applied to income tax, where the recipient pays all of the tax, whereas the employer pays the bulk of payroll tax.

And progressive taxes would be a particular disincentive to exempted companies, which are in Bermuda at least in part to reduce their tax burden. Steeply progressive taxes would also be a disincentive to employment in Bermuda, where businesses are already burdened with heavy benefits costs. More importantly, progressive taxes would bring Bermuda one step closer to income tax, which has rightly been a taboo subject in local politics and which the PLP promised not to introduce. Instead, there seems to be at least a temptation to bring about a form of income tax by stealth.

Nonetheless, the tax review does address a more fundamental problem for Bermuda. The Island's tax system was designed to cater to a tourism-dependent economy in which visitors shouldered a relatively high tax burden through Customs duties and the like.

As tourism declined and international business prospered, it was timely for the United Bermuda Party to review the system in order to determine if it was still fair and to ensure that no one sector of the economy was over-burdened.

Indeed, at the time it was argued that international business was not carrying its fair share.

The review largely puts paid to this notion. International companies do in fact pay their share, and taxation is evenly spread through income groups, at least according to the statistics, which are now some seven years out of date.

That's good news, and suggests that Bermuda's tax system continues, on the whole, to serve the Island well. There is probably room for some tinkering and some further reductions in Customs duty.

At the same time, Government's focus should be on reducing overall expenditure, or at least reducing the rate of increase in expenditure, which has been growing faster than the rate of inflation for all too long, rather than on figuring out ways of increasing the tax burden.