Bermuda's business community yesterday said there was little to take exception to in Government's 2004 budget, although retailers had hoped for some breaks.

There was also praise for Finance Minister Paula Cox's promise of increased Government accountability on spending, and that unemployment insurance had dropped off the radar. But businesses were a little disgruntled at being made to bear the full weight of a payroll tax increase ? with employers now paying out 8.75 percent of a 13.75 percent total levy, as well as facing a five percent increase in Government fees.

The increases led some business leaders to caution that the Island must guard against pricing itself out of the running as a viable offshore jurisdiction.

The increases in payroll tax, borne by all companies with total payrolls over $200,000 with a few sector exemptions, were estimated to add $12 million to Government coffers this year alone.

"I think it is very hard to take issue with the majority of social issues Government wants to address in this budget," said Bermuda Chamber of Commerce chairman Charles Gosling.

He also gave high marks to Government's intent to increase accountability on the public purse with Ms Cox saying in her budget statement that "Government has increased its efforts in accountability and performance measurement and management to ensure that the community is getting value for money".

But Mr. Gosling said he was a little dismayed at payroll tax increases before greater accountability had come into force.

He said that in total, payroll tax increases ? which were put on employers only, and raised six percent in total ? meant "the cost of business in doing business in Bermuda has just gone up by $12 million." "I am glad there is a recognised need for added accountability, in terms of spending. But it is a little unfortunate that Government decided to increase payroll tax without that accountability first."

Mr. Gosling said the public should know how their money is being used: "When Government looks and says it wants to increase revenue by x amount of dollars, the public should quickly thrust their hands in their pockets, as Government revenue is your personal expense.

And he said that it should not be presumed that Bermuda tax levels should mirror other countries. "Bermuda as a jurisdiction is not as highly taxed as some other countries, but then there is a number of Government expenditures that we do not have here ? we do not have a significant armed force, no diplomatic service, and we are not a socialist state. Even though there is a demand from the community for additional (social) services, we need to make sure we are getting fair value for what we are providing to Government. And we need to be provided proper accounting of what we get."

Mr. Gosling said he would encourage Minister Cox "to go forward" with increased accountability as quickly as possible. As for unemployment insurance, something promised in last year's budget from the late Finance Minister Eugene Cox with seed money set aside, Mr. Gosling said he was quite happy it had not come up for mention in this budget, which he saw as unnecessary given that some workers chose to work on a "seasonal" basis, and unemployment was not a real issue for the Island.

Bermuda International Business Association chairman Gregory Haycock said: "There were no major surprises and we were pleased to see the furthering of policies of the late Eugene Cox. From an international business perspective, the raising of payroll fees rests solely on employer. My general comment on that is other Government fees going up by five percent is reasonable in and of itself but coupled with the payroll tax, raises worries that we could be pricing ourselves out of the market."

And Mr. Haycock cited current statistics as showing that the Bermuda company incorporations had fallen off 12 percent, making it necessary to carefully guard any competitive edge the Island has. "We are already one of the most expensive offshore business centres, and we need to remain competitive in terms of costs. International business is the engine that is driving our economy, and we must not lose sight of that and turn that business away." He added that competition from other jurisdictions is heating up. There were also some concerns on the payroll tax salary cap on the level of tax paid by executives being raised $10,000 to $235,000. "This is all part of the payroll tax concerns we have. It is not just the percentage increase, but also the increase in the cap," which effectively put a higher tax burden on exempt company executives.

Mr. Haycock said he had been pleased however to see more money set aside in this budget for lobbying activity - cited as "economic diplomacy" - "We were very pleased to see money for economic diplomacy. And we were very pleased to see mention also of a financial services academy, as BIBA is very concerned to provide opportunities for young Bermudians. But it is important that they understand what is required; the appropriate education levels needed to enter international business." Although there were few details given on how the academy would be set up, Mr. Haycock said he looked forward to learning more.

Mr. Haycock said he was also pleased to see no mention of unemployment insurance: "We are glad it has not been included. It would be expensive to administer and we think there are alternative ways to deal with requirements, at a much less expensive rate for Government, and ultimately the public."

Overall, Mr. Haycock gave the budget high marks: "I think it is a very good budget that reflects the needs of the demands of Bermuda services. We also welcome the move to increase the use of zero-based budgeting and more accountability."

But praise for this budget was tempered with some disappointment from retailers, who had lobbied hard for similar relief measures to those being handed out to restaurants and hotels, who were exempted from payroll tax increases. David Ezekiel, head of the Association of Bermuda International Companies, said: "I think it is certainly a fairly balanced approach. Government has made the determination that it should continue to upgrade services, even in the face of a tougher economic climate in the last two to three years. Clearly there is some optimism that the economy will improve, with the balance going to initiatives."

Mr. Ezekiel said prudent control of the public purse was always sought, but this seemed to be recognised by Government.

"We always stress the need for cost containment and if one reads the narrative in the budget, this appears to be something that Government acknowledges, and is making strides with in using zero based budgeting.

"We did expect some increases in payroll tax. While business clearly never looks forward to increased taxes, it is good to know employees are protected. And I do not think anyone is going to take exception with an increase of .75 or an increase in the payroll tax salary cap. If the increases had been larger, there may have been discussion, but there is not anything here to raise great concern. Business will be satisfied that Government is already making a big contribution, and that some sectors need some encouragement."

Mr. Ezekiel said there was always the concern that Bermuda could price itself out of being a leading offshore jurisdiction, but said he did not see these increases as doing that. "The payroll tax increase will hit businesses in different ways. It hits service businesses the hardest as their biggest expense is salary, and the ratio to revenue is very high. There may be discussion with Government on how the payroll tax structure impacts different sectors. But Bermuda, as an international business jurisdiction, has done very well in terms of staying competitive."

Mr. Ezekiel also praised Minister Cox, with this being her first budget. "For a first budget, it recognises the reality of the last two years' economic impact, but it is not a knee-jerk reaction in terms of where the economy has been, but in hopes that general economic recovery will continue."

George Grundmuller, head of the visitor retail division of the Chamber of Commerce, said: "I just came out of an executive meeting (of retailers), and it is fair to say that many retailers were disappointed. We were lobbying for payroll tax reduction in the off season, especially for tourist-related businesses. Instead we got an increase of .75 percent. Retailers feel they are in a similar situation to certain groups that are exempted from payroll tax, especially hotels and restaurants. They felt they are equally affected by a downturn in tourism, and there is disappointment that retailers did not get the same consideration."

Retailers were also reportedly vexed that a $200,000 payroll cap for small businesses was not moved up.

Mr. Grundmuller said: "That cap has not been increased to our knowledge for at least ten to 15 years, although the inflation rate has gone up and up. Many businesses are right at the threshold, and they are not hiring, so they do not go over the $200,000 cap."

Besides an increase in the small business cap, and payroll tax breaks, retailers were also dismayed at the message sent out by the waiving of a 72-hour travel requirement before claiming a $100 duty free allowance.

Mr. Grundmuller said: "The chamber worked very hard on the Buy Bermuda campaign; to keep business here for Bermuda retailers. Raising the 72-hour requirement surely does not help our objectives," he said. Although retailers' requests to Government ? made during discussions with the former minister last year, and an introductory meeting this year with Ms Cox ? fell on deaf ears, Mr. Grundmuller said they would continue to meet with Government.