Retailers are not likely to get the duty-free Bermuda they have been lobbying for, after Finance Minister Eugene Cox ruled out getting rid of Customs duty on the Island.

Mr Cox said the answer to falling profits for the sector did not lie in the removal of duties, but in finding new ways to attract customers.

Shop owners have been lobbying for some years to get rid of tax on their wares and make the Island a duty-free shopping destination to raise their flagging sales.

But speaking to The Royal Gazette, Mr. Cox said retailers had already been given a tax break on taxes imposed on clothing and food.

"Getting rid of Customs duty is not the answer," said Mr. Cox. "We have written off duty on clothes and food already."

And he said that he and his Government were working with the sector to find a solution to the retailers' problems, but said: "The answer isn't just in removing all duty."

And he added that the Government relied on the duty from retail for between 28 and 29 percent of its revenue, and asked where this revenue, which was needed to run the country, would come from. "We have to get revenue some way. If we did away with it, it would increase the demand placed on where we get money for services," he said.

He said that the sector was facing competition from residents shopping abroad and e-commerce as well as the falling number of tourists coming to the Island.

And he pointed to the fact that residents often paid 33 percent duty on their goods when bringing them back from abroad, and that this tax did not seem to bother returning residents at the airport.

He said that taxing on consumption was a fair way of taxing people as the people who had more money spent more and paid more taxes.

"Those who can afford to pay more pay more with consumption-based tax," he said. "That one sector that can pay more pays more."

He said that his department had set up a think-tank with retailers to find ways of improving figures. He added: "We are certainly not ignoring the sector. It has a role to play in the economy and we are doing all in our power to aid and abet them"

Last week The Royal Gazette reported that the Chamber of Commerce was helping retailers on the Island petition the Government to give them some kind of relief in the 2002 Budget, due to be set in February, after sales in some sectors fell by almost $1 million in June alone.

Overall sales fell to $46.9 million, down 6.1 percent in June, and retailers were looking to the Minister of Finance for some help to balance their books.

Almost all retailers on the Island have been hit by months of poor sales, with a slumping tourism sector, a steady increase in residents buying from overseas, the flourishing in e-buying and a decrease in the amount of shopping done on the Island.

The Retail Sales Index, a key economic indicator, showed that in June, shoppers were slowing down their spending, as they had for the past three months. In contrast the amount of goods brought in from abroad soared by more than nine percent.

The Retail Sales Index so far this year has seen four months out of the first six showing a fall, one month remaining flat and only January showing upward movement.

In June consumer spending on clothes and accessories was particularly badly hit, dropping 9.8 percent.

Mr. Cox said: "The success of the retail sector is of key interest to the Government and is a vital sector."