The payroll tax rise imposed by the Budget will "diminish job opportunities for Bermudians", a group of the Island's major international insurers has told Government leaders.

The Association of Bermuda Insurers and Reinsurers (ABIR) argues that the tax hike, among other factors, gives insurers an incentive to base employees in their overseas offices, rather than in Bermuda.

ABIR last week delivered a letter to Premier Ewart Brown, as well as Deputy Premier and Finance Minister Paula Cox, voicing their concerns and requesting a high-level meeting, The Royal Gazette has learned.

Ms Cox announced in her Budget last week the intention to increase the rate of payroll tax from 14 percent to 16 percent, as well as to raise the payroll tax cap, from $350,000 to $750,000. MPs approved the legislation this week.

A source close to ABIR, whose membership of 23 companies employs around 1,800 people on the Island, sent an excerpt from the letter to this newspaper, but did not send a copy of the entire letter.

The excerpt reads: "We believe the payroll tax increase will lead to limits on future employee growth and over the long term will diminish employment opportunity for Bermudians.

"This tax increase, together with other factors, creates incentives for employees to be located where we have other business centres."

The source added that ABIR members were "surprised and disappointed" about the proposed payroll tax increase and a lack of consultation with them.

ABIR president Brad Kading said the group communicates its concerns on policy matters to the Government directly and does not want to speak publicly on such policy matters.

He confirmed a letter had been sent and a meeting requested, but would not say anything more about the controversy around the payroll tax increase.

Marston Becker, the chairman and chief executive officer of global re/insurer Max Capital Group, which employs about 100 people in Bermuda, last week described the cost increases related to the Budget as "significant".

During an interview with The Royal Gazette about the plans for Max to merge with Bermuda-based reinsurer Harbor Point, Mr. Becker said: "The unilateral increase in cost in the Budget is significant.

"All companies are going to have to assess whether they can continue to compete in a global market with the cost structure in Bermuda as time moves on.

"So we would encourage Government to be sensitive to the economics of what they're doing."

International companies tend to pay the whole of the payroll tax burden, including employees' share. The raising of the salary cap will significantly increase the cost of employing high-earning senior executives based on the Island.

If top executives were to be relocated outside Bermuda, the support staff they require here — which includes many Bermudians — would also inevitably be trimmed.

In an interview with this newspaper last August, Mr. Kading spelled out the importance to Bermuda of senior staff, particularly those with the word "chief" in their job title, being based on the Island.

"We want companies' headquarters team to be here — the C-suite people," Mr. Kading said. "If they're here, then there will be spin-off jobs, in accounting, underwriting and corporate administration.

"If the HQ moves, then the C-suite people move and those functions go to another domicile."