IN the extended afterglow of its 1998 election victory it began to appear the Progressive Labour Party's fiscal policies were about as pink as the pages of the business world's house paper .

The mask of market-friendly fiscal responsibility could now be as casually discarded as the one that briefly - and unconvincingly - attempted to disguise an extraordinarily clumsy grab for political power behind the contrived artifice of constitutional reform.

Income tax - perhaps moreso than the other "I" word, Independence - is the tinkling bell which evokes a predictably Pavlovian reaction from Bermudians regardless of political philosophy or party affiliation. The instinctive aversion Bermudians have for income tax does tend to be supported by the grim tally of facts at hand, particularly when it has been introduced not to spread the tax burden more fairly but rather as a punative measure.

When income tax is used to gouge the rich, to penalise success and punish individual initiative, the rich take themselves and their wealth elsewhere. This scenario has been played out any number of times and in any number of locales. As a direct consequence of the high-end of the tax base diminishing, the slack must then be taken up by those in the middle-income brackets. The ensuing, corkscrewing downward economic spiral is more or less predictable.

Although Bermuda has long had a flat income tax in place - call it the Hospital Levy, call it Employment Tax, it is an income tax by any other name - what the PLP has long advocated is a graduated form of tax on all income, directly and indirectly earned.

Income tax has long been an article of faith for the PLP, the green-eyed politics of envy kitted out in the garish red robes of a socialist priesthood whose dogma is founded on hope rather than facts. And it's hardly bogeymanism to point out that whenever and wherever income tax has been used to play to a gallery packed with the party faithful, whenever it has been the primary siege engine in a campaign of class warfare, it has failed.

For sound, vote-catching reasons a graduated form of income tax has never been an expedient a PLP Government would introduce in its first term. But the only sensible conclusion to be drawn from the vaguely worded and intentionally nebulous passages on the subject found in various PLP manifestos is that income tax would constitute the keystone in the arch of its fiscal policy during a second term and beyond.

In what appeared to be a clear and unambiguous repudiation of its socialist roots, the "New Bermuda" manifesto stated that "a PLP Government will not introduce income tax". This appeared to be a categorical enough statement of intent. But then so did the Premier's one-word answer to a Parliamentary Question on what Constitutional tinkering her Cabinet was planning: "None."

Clearly, with its fluid definition of the truth and crass contempt for public opinion, anything is possible.

Indeed, last year a PLP backbencher hinted ominously on the floor of the House of Assembly that a tax on what accountants call both earned and unearned income might have to be introduced to subsidise his Government's increasingly spendthrift ways. And party propagandists have not been shy about advocating taxes on the unearned components of income - rents, dividends, corporate profits - in addition to retaining the existing imports-based consumption tax.

With the Employment Tax currently fixed at just over 12 per cent, when consumer taxes, land tax and other Government levies are totalled up, Bermudians pay in the region of 25 per cent of their annual income, either directly or indirectly, to the Tax Commissioner. That's broadly in line with what taxpayers fork over in most prudently administered jurisdictions. However, this bill is not shared evenly and there are few apologists for the existing tax

Government's across-the-board 33 per cent import duties are passed on to consumers in the form of exorbitant price tags These have made Bermuda uncompetitive as a tourism resort, caused goods and services here to be so very expensive and, in recent years, created wage disparities normally found in the Third World between newly minted millionaires in the largely untaxed financial services sector and its satellites and the overly burdened tourism/retail sector workforce.

As a former Bank of Bermuda president succinctly put it, the newly flush industries of the financial services sector avoid Bermuda's primary tax by dealing in money instead of imports on which that primary tax is based. While the exempt companies based in Bermuda are, by definition, exempted from Bermudian taxation, the satellite industries that service them are not. So the accountancy and law firms and other professions shoulder a disproportionately small share of the overall tax burden.

Clearly there is a compelling need for a cogent review of the existing tax structure and reform is not only necessary, it is long overdue.

During the final troubled months of its last term, before it collapsed under the combined weight of hubris and bravado, the United Bermuda Party commissioned precisely such an overview. The survey, conducted at a six-figure cost, was not completed before the UBP was not so much voted as chased out of office in November, 1998. When it was submitted to the new PLP Government, the report vanished into that real, all-consuming Bermuda Triangle bounded by the Cabinet Office, the House of Assembly and the Government Administration Building.

The results have never been made public, the recommendations never tabled in the House of Assembly.

However, you don't need Harry Truman's ideal one-armed economist to tell you the report would not have suggested a graduated tax on earned and unearned income being applied in conjunction with the existing museum piece consumer tax because there is no on-the-other-hand scenario given such a developmenty. There could be only one outcome, a particularly grim one at that.

This free-spending Government is clearly desperate for new sources of revenue to cover its mounting bills. The economy is undergoing a period of what is euphemistically termed negative growth by economists - that is decline. By the end of this financial year, Bermuda will be $250 million in debt.

That's bumping up against the self-imposed ceiling for Government borrowing of ten per cent of Gross Domestic Product. This year's Valentine Budget - no major tax hikes and spending for capital projects subsidised by borrowing - was clearly a vote-catching election gambit. It also amounted to a massive delayed tax increase as both the principle and the interest on Government's loans will have to be paid off.

This week's revelation that the Finance Ministry has extended feelers to Revenue Canada on creating an income tax system for the island is likely resounding across the island like a whipcrack of summer thunder over the Great Sound.

But the reality is this news should not have so violently stirred Bermuda from its characteristic ennui.

Bermudians who have watched apathetically as their tax dollars have been spent on a fleet of official limousines, round-the-world junketeering for Cabinet Ministers and million-dollar routine maintenance work at Housing Corporation properties must have realised the bills were eventually going to come due. And an income tax is presumably seen as an easy option when it comes to making up the growing shortfall between Government expenditure and Government income.

But the bald fact of the matter is those most able to pay are also most capable of hiding their incomes. The rich are different from you and I because they can afford to hire small armies of tax laywers and accountants to ensure they keep their riches. Through all manner of perfectly legal manoeuvrings, multi-millionaires can claim, straight-faced, a relative pittance of an income, one that's in inverse proportion to their net worth. This, of course, is hidden amid the wildernesses of legal mirrors that tax accountants and lawyers are so adept at constructing.

Those who depend on their pay cheques to get by and have only minimal assets end up paying the bulk of the income tax bill.

In mid-1970s Britain, for instance, a benighted British Labour Party in thrall to industrial protection rackets masquerading as trades unions and beholden to the failed God of socialism, openly proclaimed its intent to squeeze the rich until, as the then-Chancellor of the Exchequer gloated in an exceptional moment of candour, they squeaked.

The top rate reached 80 per cent and above for earned income of more than ?24,000 - then about $50,000. So the very rich took themselves - and their money - overseas if necessary in an exodus of tax exiles, some of whom ended up in Bermuda; those in the middle income brackets were reduced to penury. So was the country. Britain, on the verge of becoming the new "Poor Man of Europe", ended up mortgaging itself to the International Monetary Fund.

Precisely the same will hold true here.

Most of the new revenues collected will not go on social programmes or education but rather to pay for the new level of bureaucracy required to coordinate and collect the income tax.

The mega-rich residents - the Ross Perots, Michael Bloombergs and Silvio Berlusconis - who already pay taxes in their own countries will find summer homes elsewhere rather than submit to a second set of bills.

And given some of the most diabolically clever tax lawyers and accountants in the world call Bermuda home, professionals who earn their keeps advising an international clientele in matters of tax avoidance, those Bermudians with the necessary wherewithal will doubtless be availing themselves of their services.

The rest of the island will need to break out their hard hats because the keystone of Government's fiscal policy will all too soon collapse the entire arch of the economy.