Bermuda Chamber of Commerce president Charles Gosling yesterday warned that local retailers would find it harder and harder to compete with overseas shopping destinations if Government did not look at revising the Island's Customs Duty tariff structure.

Mr. Gosling, who completes his term as Chamber president this week, made the comments after the release of the Retail Sales Index for February, which showed continued local weakness ? and another dramatic rise in overseas shopping.

For the second straight month, the volume of retail sales failed to improve on the same period in 2004.

While the value of retail sales rose 3.8 percent to $41.6 million, the volume, or the actual amount of goods sold, fell 0.1 percent after February's 3.9 percent inflation rate was taken into account.

In January, retail sales were flat at $38.9 million compared to the same month in 2004 while they fell 3.9 percent after inflation.

By contrast, overseas purchases by returning residents continued to increase year over year, rising 18.4 percent to $3.09 million in February and 32.5 percent to $5.22 million in January.

And the proportion of goods bought overseas increased from 6.1 percent in January to 6.9 percent in February, a worrying sign for local retailers.

Taken together, residents overseas and local spending rose 4.7 percent to $44.7 million in February and three percent to $44.2 million the month before. Mr. Gosling said: "The Bermuda retailer will certainly make the comment that what we have is one tax structure in Bermuda fighting against another one.

"Bermuda's tax system uses a tariff-based structure to raise the bulk of revenue while it is fighting a (US) system that only uses tariffs as a weapon of diplomacy.

"Effectively, Bermudians who go abroad to shop do so duty free. Until Government gets a grip on this, we will see more retailers having trouble and more retail companies going out of business."

Earlier this year, Trimingham Brothers, long Bermuda's leading retailer, said it would close its doors at the end of July. The company said some of its problems stemmed from the difficulties of competing with US retailers while it was burdened with Customs duty.

Government attributed what sales growth there was in February to a jump in car sales, which soared 19 percent year over year after slumping by 24 percent in January.

However, that gain was offset by a 2.6 percent decline in sales of construction materials. Government said that was due in part to the fact that construction sales in February, 2004 were unusually strong as a result of demand for goods for repair after Hurricane Fabian in 2003 and said growth was now similar to the period before Fabian.

Mr. Gosling said he was becoming concerned that the construction boom that fuelled the economy in 2004 was starting to slow, and said Government should consider launching some of the capital projects it has in the pipeline to maintain activity.

Clothing sales also slumped in February, partly because of the end of January sales, which boosted sales in that month by 18 percent. As normal pricing resumed, sales dropped 5.8 percent year over year. In addition, some clothes shops were closed for renovations.

Sales of fuel and food rose 5.1 percent and 2.6 percent respectively, but Government noted that the increases largely mirrored the higher cost of goods in both sectors, rather than any organic growth in the volume of sales.

Local inflation is "pretty grim", Mr. Gosling said. "We need to keep inflation very close to the US rate or we will continue to price ourselves out of the market," he said.

Bermuda's rate of inflation in February was 3.9 percent while it was three percent in the US, 3.2 percent in the United Kingdom and 2.5 percent in Canada.