International business has been brought under the same payroll tax format applied to local businesses.

This follows changes announced in yesterday's Budget Statement from Finance Minister Eugene Cox.

Exempted companies will now have to report actual wages and salaries for payroll tax purposes -- instead of having the option of reporting an assumed figure.

The move was designed to ensure that the Island was not viewed as a tax haven, explained Mr. Cox.

"One of the significant criteria for the identification of a jurisdiction as a tax haven is that a company owned by non-residents is treated more favourably for tax purposes in that jurisdiction than a local company,'' he said.

"In Bermuda, companies face the same taxes, whether they are local or exempted.

"However exempted companies have been allowed to choose whether to report actual wages and salaries for payroll tax purposes, or to report an assumed figure. This option will be removed to eliminate the distinction.'' But to avoid damaging the prospects of companies engaging the best staff by causing a potential for significant double taxation, a cap of $250,000 will be placed on any individual's remuneration declaration.

The amount of tax actually paid by exempted companies under the new payroll tax proposals is estimated to change very little, he noted, since they will be able to claim the payroll credit of $2,400 per employee per annum.

Bermuda International Business Association Chairman Raymond Medeiros noted that the changes to the payroll tax were somewhat complex and obviously designed to assist small companies.

"Whilst the majority of our members will not benefit from that objective in any significant way, we understand the rationale.'' Shadow Finance Minister Grant Gibbons said international businesses would have to do some number crunching to determine how the new payroll tax system affected them.

"Basically international businesses will have to do the numbers to see if they are better off or worse off under the new system,'' he said.

Mr. Medeiros also acknowledged the reasons given for eliminating the option for exempt companies to report actual or estimated salary figures for payroll tax purposes.

"In the wider context of Bermuda's position regarding the OECD and EU taxation initiatives, we can see why the Minister made this decision.'' Chamber of Commerce President Cris Dapena backed the idea.

"It is a good thing as the distinction between exempt companies and local companies will be removed,'' she said.

Ms Dapena noted that many local business and individual businesses erroneously believed that the international exempt companies were being exempted from local taxes.

"They are exempt income taxes in event they are ever introduced, but that tax does not currently exist or affect anyone,'' she pointed out.

"Now no one can claim that exempt companies are actually exempt from taxes that exist.'' Grant Gibbons