of Directors, Bermuda Independent Centre.

*** Bermuda has throughout its history encouraged the earning of wealth without the requirement of appropriating a portion of those earnings for the common good. It has instead raised funds by taxing consumption and ownership.

It has thrived with this policy. It has encouraged investment by Bermudians and non-Bermudians alike in the Island. It has avoided the bureaucratic monster necessary to administer a Government tax on earnings. It has deterred the growth of an industry established in taxed areas for the sole purpose of providing advice to those wishing to avoid or evade the imposition of income tax. It has kept us honest and directed our labours to creating wealth and not being afraid to invest it in our heritage.

Political and business leaders alike have advertised the Island, both in Bermuda and abroad, by the promotion of the Island as a sophisticated business centre with fair, yet relaxed, legislation and freedom from the shackles of income tax. Praise and envy has been heaped on us by enthusiastic investors in the Island, and in some cases other jurisdictions have attempted to emulate our consumption taxes as an alternative to income tax.

All this has now changed. The imposition of tax on earnings contained in legislation over the past few years, and recently, has established the principle of income tax in Bermuda. Its evidence may not yet be very apparent, its burden may not be very great, but its roots are well established. Examples of income tax are the tax levied on profits earned by non-Bermudians on real estate, the tax assessed on providers of services to foreign owned companies, and the tax on the employees' portion of salaries. How long will it be before a legislator or employee will question the fairness of this income tax on wages and demand allowances for costs incurred in earning those wages.

A flat rate of tax on income has been suggested as a fair way of contributing to Government costs. It would be, in a perfect world, where people did not have children (child assistance), did not earn income in different ways (earned income allowance), did not have mortgages (mortgage interest relief), did not reach 65 years of age (age relief), did not pay maintenance (maintenance relief). My "annotated'' copy of the UK Finance Act of 1994 alone contains 541 pages of close script which details just the changes in the tax system from the 1993 Act.

I agree, it is not difficult to disparage income tax -- and it has its place in a well-regulated, large society. But I spent ten years dealing with clients who could never pay too little, and negotiated with the Revenue, who could never receive too much. I was a young, enthusiastic accountant and a member of the Chartered Institute of Taxation (as it now is). During this period, I computed, assessed, negotiated and settled the tax affairs of companies, partnerships and individuals. It was an all consuming and demanding job and I was horrified at the time clients had to devote to planning and recording their taxable activities to appeal Revenue assessments -- it took months out of their business year. Further, they often made poor business decisions, influenced by the need to reduce the level of taxation.

We obviously need to raise revenue in Bermuda to support the lifestyle and infrastructure we enjoy. But an income tax, no matter how small and insignificant, can and will grow into a monster. Remember Pit the Younger's words when he raised a tax on income to support the Napoleonic wars "it is purely a temporary measure!'' That tax was six pence on the pound. Presently, income tax almost universally is now calculated at rates in excess of 35% of income and in some countries the rate is as high as 60%.

As Bermuda directors and businessmen from all sides of the corporate spectrum we must do what we can to ensure taxes are consumption based and not income based. The more we have and consume, the more we pay. This is fair, reasonable and has for many years been the foundation of Bermuda's reputation and prosperity -- which after all, depends solely on external sources and influence.

Let us hope we have recently just been brushed by an iceberg and we are not sitting on the top of an active volcano! Mr. Geoffrey W. Moore