News that there would be no tax hikes in the Budget was welcomed by business leaders yesterday.

Government will extend some tax concessions on capital imports for major building and renovation projects in the hotel and restaurant sectors as well as the telecommunications sector.

And the fuel concession for commercial fishermen also will be extended and duty rates for a range of energy-efficient goods will be set to zero.

And Finance Minister Paula Cox resisted the temptation to hike taxes on cigarettes and alcohol.

She told The Royal Gazette: "Sin taxes, more often than not, affect people who have less disposable income.

"People are going through difficult times so that might be the only luxury that they allow themselves."

The standard rate of payroll tax will remain at 14 percent, and Ms Cox also resisted the temptation to raise payroll taxes for higher earners.

Currently income above the first $350,000 is not subject to tax but Ms Cox said tinkering with this would send the wrong message.

"We have international business who have also suffered from the sub prime situation and investments. Their bottom lines are looking less healthy.

"If anything what you want to do is give them an incentive to stay here not maximise the pain to their bottom line."

She said Bermuda wasn't seen as cheap so increased taxes wouldn't help.

The yield from payroll tax is estimated at $350 million, the same as the revised estimate for 2008/2009.

Ms Cox said while jobs would fall in 2009, modest salary and wage increases should help keep the payroll tax yield at its present level.

Reacting yesterday to the Budget, Bermuda Employers Council (BEC) president Graham Redford said: "The BEC is happy to see that the Honourable Minister recognises that this is not the time to raise taxes."

Mr. Redford said it was also good to hear the Minister voice support for assisting employers in keeping their staff.

He added: "We are also pleased to see that Government is paying closer attention to its spending levels overall so that the social programmes that government is committed to are funded from savings in other areas of spending."

Association of Bermuda International Companies (ABIC) head David Ezekiel said it was absolutely essential that there were no new taxes, although some people had expected tax cuts.

He added: "We welcome the tone of the budget it was certainly precautionary without going into a panic.

"It will be a very hard period ahead but at the same time you have to keep the engine running.

"There is nothing to be gained by retreating into a bunker. I think overall reaction from the business community will be it's a good, steady as she goes (budget), and that's the way it should be."

He said ABIC would be making a more in-depth statement on the Budget after it had time to analyse it.

"I think we have a bit more work on the expense side we have always encouraged tighter control," added Mr. Ezekiel.

Government also reversed the recent import duty hike on boats. Last year it raised the rate of import duty on boats from 33.5 per cent to 55 per cent but after a rethink Government decided to drop import duty on boats and parts to 22.25 per cent in 2009/2010.

The impact is anticipated to be revenue neutral as it is likely to stimulate more sales and repair work and thereby drive revenue yields for both customs duty and payroll tax, said Ms Cox.

The yield from customs duty in 2009/2010 is estimated at roughly $245 million.

And to ease the squeeze on business, the Office of the Tax Commissioner will institute a payroll tax amnesty programme waiving all penalties and additional taxes levied on outstanding payroll taxes.

Ms Cox added: "HM Customs will work with retailers to defer part of their customs duty payments for up to three months with the anticipation that a significant proportion of merchandise will be sold within that timeframe."

Ms Cox conceded the economic slowdown would harm Government tax haul for the coming year which is down around $16 million from the original estimate of $985 million for 2008/2009.