Sneaky sailors could be conning Government out of hundreds of thousands of dollars a year in taxes by cruising through a loophole in the law, The Royal Gazette can reveal.

Pleasure boat owners are buying commercial fishing licences which allow them to import boats duty-free.

And an industry insider said the $350 licences are jumping ship at prices of up $12,000 in a bid to avoid paying whopping duty on the importation of new craft.

But now new laws are being drawn up to torpedo the temptation to cheat on duty.

Agriculture and Fisheries Director John Barnes said -- of around 200 commercial fishing licences -- up to two-thirds are dead in the water.

And he added the law was vague on what counted as a commercial boat and that there was no fixed time-at-sea period for professional fishermen.

Mr. Barnes said: "If I was to buy a gin palace, Customs would probably want $500,000. If it's a licensed fishing boat, it comes in duty free.'' He added: "Up until a few years ago, there were one or two odd occurrences.

"We have been monitoring it, but until the boat arrives in Bermuda, we don't know if it's going to be used for fishing -- and the law does not require a minimum amount of fishing.'' Mr. Barnes added: "This is something the department would like addressed. We want to see a way whereby genuine fishermen who want to take advantage of technology can get some benefit, but we don't want people using this as a tax dodge.

"One solution might be to make licences contingent on a minimum number of hours at sea.'' Tax on pleasure boats runs at 33 percent, with ten percent duty levied on tourist-related craft. The duty-free category is reserved for fishing boats and vessels used for scientific purposes.

Mr. Barnes said he knew of one case of a boat sailing under a commercial fishing licence and plying the booze cruise trade.

He added: "There are also tax breaks for tourist boats, so the owner paid up and gave up the licence.'' And Mr. Barnes warned: "Just recently, Customs have been coming down like a hammer on a few of these people.'' He added that the scale of the problem was unclear -- but suggested very few boatowners were lured into cheating on fishing licences.

Mr. Barnes said: "The law was put there to encourage fishermen to improve their boats and even now we would like to encourage people to upgrade their boats. We're trying to encourage this industry.'' He added: "There hasn't been a whole lot of abuse, but there have been a few iffy situations and some of those have resolved themselves.'' And he said: "All this will come under scrutiny in a Green Paper we hope to publish later this year and we hope to address it.'' Collector of Customs William LeDrew added: "From time to time we do run into situations where somebody with a commercial licence has been using the vessel for other purposes.'' He said Customs usually fired a broadside in a letter threatening to impound the craft if it was not used for commercial fishing.

TAXES TAX FISHERMEN FHP