The body representing international companies in Bermuda has reacted with "real disappointment'' at the small change in the amount of Payroll Tax they will have to fork out.

In a strong statement, the head of the International Companies Division of the Chamber of Commerce, David Ezekiel said the reduction was not meaningful.

But he added that it was not a surprise as the Minister of Finance had seemed reluctant to let go of the windfall reaped by the Government from the changes made in last year's Budget.

Mr. Ezekiel said: "I note that we made some progress with the minister on the Payroll Tax, but the reduction from $250,000 to $225,000 is not a meaningful reduction and is a real disappointment.'' However, the International Companies Division of the Chamber of Commerce and Bermuda International Business Association (BIBA) all welcomed the move to level the playing field between local and international businesses in regard to payroll taxes.

Last year's Budget saw international businesses' Payroll Tax bill rise between 30 and 100 percent with the bill for ACE and XL believed to have each gone up by more than $1 million.

The hike in tax came about from changing the nominal cap to $250,000 from around $70,000 and raised $12 million more than expected during last year.

Minister Eugene Cox had said at the time that a change to the way the tax was collected last year was expected to be revenue neutral.

International companies had hoped that the tax would be taken back to pre-2000 budget rates and said that they had discussions with the Minister of Finance about the issue.

Mr. Ezekiel added about the Budget reduction: "It isn't, however, a major surprise as all the body language during our discussions over the last year indicated that the minister was reluctant to give up this windfall created by last year's Budget.

"What we were looking for was for the minister to follow through on his statement last year that he intended the change to be `revenue neutral' but he has chosen not to do so.'' He added that the international companies division would now discuss the matter and decide whether and how it wants to pursue the matter further.

Mr. Ezekiel added: "Once he gets past this issue, we are pleased to see that the tax rate remains unchanged for business and employees and we are also pleased to note the level playing field for local and international business in relation to the Payroll Tax cap.'' The Chamber of Commerce also welcomed this, stating: "We applaud the steps that have been taken to ensure that international and local companies operate on a level tax playing field.'' BIBA's Chairman, Raymond Medeiros said: "We are pleased to see the minister has heard the concerns of the local business sector and applied the same treatment of Payroll Tax for both local and international companies.'' Mr. Medeiros added that this change addresses the historical imbalance between local and international companies and was sensible in the light of the OECD and other international regulatory bodies.

He said: "This clearly aims to reinforce Bermuda's position as a jurisdiction of integrity.'' But he said that BIBA would have to assess how changes in the way Payroll Tax is collected for self-employed professionals affected its members.

Mr. Ezekiel said that the current account surplus was healthy but expressed concern about an increase in borrowing.

He added: "It is, however, good to see that a large portion of the capital expenditure is related to education.

"In closing I would point out that the international sector generates a larger portion of Government revenues as each new year comes along and Government must be mindful not to make us uncompetitive by increasing costs.

On those lines we are pleased to note that Government has held company taxes and fees at prior year levels.'' David Ezekiel