Local business welcomed the Budget yesterday, but warned that Bermuda’s finances will take time to improve.

John Wight, president of the Chamber of Commerce, singled out continued effort to reduce the deficit and advance warning of changes to the tax system to ease the burden on lower earners as significant.

Mr Wight said: “The business community appreciates the approach of giving a long notice period regarding tax reform changes that businesses will need to plan for. We also strongly encourage Government to engage stakeholders as part of a collaborative and consultative process before these changes are implemented.”

Payroll tax, scheduled for major reform in the next year, went up 1 per cent to 15.5 per cent, with the employee contribution going up 0.5 per cent to 6 per cent.

Mr Richards also announced a new general services tax, set at 5 per cent.

But Mr Richards said that the entire payroll tax system would be overhauled for the next financial year and structured in a more progressive way to benefit lower-income earners.

Mr Richards added that the goods-based tax system was also due an overhaul, with changes to customs duties structures and the inclusion of a services sales tax, which could be implemented as early as the start of the 2017-18 tax year and raise $50 million a year.

He explained: “In order to broaden the tax base, a new services sales tax, the General Services Tax, will be levied on turnover from the provision of most services by service to the public.”

But Mr Richards said that the new tax would exclude banking, insurance and healthcare, as well as small service providers.

Mr Wight said that the Chamber was on record as saying the priority for this year’s Budget was cutting the deficit so that Bermuda would be able to tackle its massive debt, likely to hit $2.2 billion by the end of this financial year.

And he added: “We were pleased to hear that the correlation between the number of people residing in Bermuda and economic growth.

“Economic growth, or GDP, is a function of the change in productivity and the change in the number of people in Bermuda.

“An ageing population in Bermuda and fewer Bermudians entering the workforce than those retiring is a fact and a trend that is worsening and worrying.

“There needs to be greater discussion in our community about how important it is to have more people live and work in Bermuda and how we do this to benefit Bermudians.”

Mr Wight said: “Our member organisations of the Chamber of Commerce continue to struggle.

“There is no opportunity for real growth until they have more people in Bermuda to sell their products and services to.”

And he welcomed tax reform plans, based on recommendations from the Caribbean Regional Technical Assistance Centre, part of the International Monetary Fund.

Mr Wight said: “Tax reform is long overdue. The minister’s decision to remove tax loopholes that are illogical and unfair, along with a progressive tax system that recognises that those who earn higher wages should bear a greater brunt of taxes than they currently, is commendable.”

He added: “Our hope and expectation is that the cost to employers of tax reform, including the increase in payroll tax from 14.5 per cent to 15.5 per cent, which commences April 1, 2016, will not be too punitive.”

He added that the Chamber would discuss the Budget further after it examined it in detail. But Mr Wight said: “However, our initial thoughts are that the Budget was well thought out and continues progress towards improving Bermuda’s finances.

“Measurable improvements will not be felt any time soon, however.”