Social insurance contributions will rise by 6.75 percent to cover the increase in pension payments to seniors, Finance Minister Paula Cox announced in yesterday's Budget.

Government says the 6.75 percent rise is to meet the five percent boost to seniors' pensions and allowances, as from August this year – the start of the Contributory Pension Fund financial year.

Meanwhile, the standard rate of payroll tax will rise from 13.5 per cent to 14 percent. Lower rates for small and medium-sized businesses such as taxi drivers and farmers will remain unchanged, as will employees' 4.75 percent share of the tax.

In announcing the $1.1 billion Budget for 2008-9, Deputy Premier and Finance Minister Paula Cox said: "As Government plans our country's finances for the next five years, equity and fairness will continue as the key principles underlying our tax policy in building the tax base to meet our commitments."

In the area of transport, the tiered rate of duty on cars will remain at 75 per cent and 150 per cent, but the threshold value seperating them will drop to $10,000. In the first increase in two years, vehicle licences will rise by three percent as from April.

Boat users however, face a hefty bill for maritime craft. Government wants to raise revenue by increasing the duty on vessels from 33.5 percent to 55 percent.

Ms Cox said: "Pleasure craft including motor boats and sailboats are luxury items. Their numbers continue to proliferate which is a reflection of the growing levels of income and wealth in our community."

Air travellers meanwhile, also face rising prices. Airport departure tax is to be increased by $10 to $35. Government says the rise – the first in seven years – is to cover the cost of improved security measures and the improvements at L.F. Wade International Airport.

Customs Duty on cigarettes will also be increased – from 15.5 cents to 18 cents per unit – to raise additional revenue, but Government says this is also considered a "health tax" to discourage people from smoking.

Elsewhere, there are a number of changes to taxes related to property. Stamp duty will be higher for properties worth more than $1 million, with the two top bands increased by one percentage point to six per cent and seven per cent respectively. Government hopes to raise $2 million from the rate changes.

Properties selling for under $1 million will have a "slightly lower rate" with the lowest band reduced from 2.5 percent to two per cent, in order to help first-time home buyers.

No changes to land tax are in the pipeline, but licence fees for sale of land to non-Bermudians are to be increased by three percent – to 25 percent for houses and 18 percent for condominiums.

Government also proposes higher fees under the Companies Act 1981, effecting a 6.5 per cent increase from April. The Ministry of Finance aims to raise $2 million in increased revenue in order to cover the costs of "rising supervisory and regulatory costs" to meet international regulations.

Ms Cox says this is "to ensure that we have the necessary financial resources to address improvements to our regulatory framework".

"The cost of maintaining the good name of Bermuda's company registry continues to increase," she said. "We have always prided ourselves on effective gatekeeping powers".

During 2008-9, Government aims to collect $985 million in revenue – a 7.5 percent rise on the 2007-8 estimate of $917 million.

"Underlying growth in the economy is projected to generate $965 million from the existing rate structure in our tax base. The additional $20 million, equivalent to two per cent of the organic tax yield, will come from the biennial uplift in fees and charges including vehicle licences, and adjustments to a relatively small number of tax rates, some of which have not been increased since 2001," said Ms Cox.

The increased revenue is also needed to cover various capital expenditure projects. These include the Port Royal Golf Course, the second cruise ship pier at Dockyard, affordable housing projects, the new court and Police complex in Hamilton, and the proposed environmental remediation work at Morgan's Point.

Capital expenditure is allocated at $155 million of the $1.1 billion Budget.

"In seeking to raise the modest amount of additional revenue to assist in financing the essential capital expenditure plan in 2008-9, Government has sought to distribute the additional tax burden in a fair and equitable manner," said Ms Cox.

In terms of tax concessions, retail establishments will receive concessions for imported materials and equipment for renovation projects. Government is to introduce a Bill to bring these concessions in line with restaurants and hotels.

Students returning from overseas will benefit from duty relief on their belongings on their return to the Island, under an amendment to the Customs Tariff Act 1970.

The Old State House in St. George's – described as "a national treasure", will be exempted from land tax.

Meanwhile, in the North Hamilton Economic Empowerment Zone, entrepreneurs in business start-ups can benefit from an extension to the special rate of payroll tax from one year to two years. Government said the move is to support the build up of working capital for start-ups in their early years.