One local business will now have to pay out the equivalent of the annual salary of one of its employees more in payroll tax, its boss revealed in the wake of Budget statement delivered by Finance Minister Paula Cox in the House of Assembly on Friday.

Alex DeCouto, owner and president of Greymane Contracting Ltd., said that the payroll tax increase of two percent to a total of 16 percent for 2010 — 2011 announced in last week's Budget, in real terms, meant a 15 percent rise in the amount of taxes his company pays — or $75,000 more.

Meanwhile Richard Thompson, owner of Island Cleaning Services, described the payroll provisions detailed in the Budget as a "disincentive" to hiring staff in an already tough economic environment.

Mr. DeCouto said the doubling of foreign currency purchase tax included in the Budget would also impact his business, with the millions of dollars of materials and equipment it brings in from overseas every year.

"My personal reaction is one of severe disappointment," he said.

"While the tax rate will increase two percent from 14 percent to 16 percent, this isn't a 'two percent increase', this is actually a 15 percent increase in the amount of taxes we will pay. We paid about $500,000 in payroll tax last year, so all things being equal we will pay $75,000 more in taxes next year. That's a whole person's salary. I've just lost a whole person worth of productivity for nothing.

"It also looks as if they are doubling the foreign currency purchase tax. We buy millions of dollars of materials and equipment from overseas every year, and this will be another increase in cost right when I am cutting margins in order to get work."

Mr. DeCouto said he was thankful that Government would at least continue to spend on the country's infrastructure — which could prove to be a wise investment if effectively managed — and looked forward to bidding on such contracts.

"But the balance is not much to smile about," he said. "I don't think any industry will be particularly pleased, bar taxis and hotels. As a citizen I am also gravely concerned about the level of debt. There isn't much discussion about the cost of this debt, and any long-term plan for managing it."

Richard Thompson, owner of Island Cleaning Services, said small businesses would see their margins squeezed yet further, while having to foot the bill for Government spending beyond its means.

"I am disappointed in the number of tax issues that have been increased, including payroll, land tax and vehicle tax all impacting on small business owners," he said. "Everybody is very conscious of the cost so it is going to be difficult.

"We are just shaking our heads at the shortfalls in Government budgets but they have been spending wildly over the last year or two and making no provision for where we today, so we are paying for their mismanagement.

"We are going to have an increase in health insurance cost and social insurance cost, so it is really a disincentive to hire people. We are just going to have to try and get more out of our current staff.

"In addition, we look at the Budget and we see some wild numbers for tourism — where are people spending that money, where is it going and what are the results? We are the ones that have to pay for it and the cost of business is just going to go up and up."