Raising taxes on international businesses in order to ride out the current economic downturn would be unwise according to the Opposition United Bermuda Party.

Yesterday, as news of a falling shop sales and rising inflation were released, Opposition Finance spokesman Bob Richards raised concerns that Government has spent more for several years and continues to do so in the face of a weakening economy.

But he cautioned that raising taxes on international business in order to ease the burden on Government coffers was not the answer.

He cited a report from the Bermuda International Business Association which revealed "a new troubling issue" — a perception that Government is "inhospitable to the international business community" The report also noted rising competition from other jurisdictions. Against that backdrop, Mr. Richards said raising taxes could seriously backfire.

Mr. Richards said: "Government can try, but there are problems with that relationship already. You can imagine how inhospitable the international business community would feel if Government came calling for more money."

Opposition MP Patricia Gordon-Pamplin added: "They have options. They have significant opportunities in other locations within their large organisations. We have seen Ace change its charter from Cayman to Switzerland and we have seen XL lay off staff, others are already moving some of their staff to other areas in their international offices and we have seen local companies outsource to Canada and Mumbai.

"Just because these companies report large profits it is not appropriate to suggest that international business is a cash cow you can milk for Government purposes."

And Mr. Richards said Bermuda would have to listen closely for signs of international business's discontent, noting that it would be unlikely companies would publicly declare cuts, as XL did last month when the company announced 47 local jobs would go.

"That won't happen, they will go into stealth mode, they will start downsizing and out sourcing, some are already doing it," he said.

"International business is Bermuda's number one industry. It keeps us afloat economically. It provides most of our foreign exchange earnings, most of our growth, most of our jobs (direct and indirect).

"Bermuda must take fast action to redress this situation. We therefore call on the government to convene a series of meetings with groups representing various segments of international business (ABIR, ABIC, Chamber of Commerce, etc.) to collaborate on specific ways to improve the perception of Bermuda, particularly the perception of Government, by key industry participants."

Mr. Richards pointed to a flagging tourism industry, cooling construction market and a concerned international business community as indicators of an economic downturn — something he raised in the reply to the Budget seven months ago. And the Opposition said money spent on consultants and the lavish Music Festival were just some examples of overspending.

"It is time for the government to snap out of it," he said. "Bermuda does not need a Government asleep at the wheel. It may have been possible to coast for the past few years on the performance of international business, but this is a time when we need the skipper's steady hands firmly on the wheel, and all other hands on deck.

"Tourism is in serious trouble. We have fewer beds available, fewer hotels in operation, rising costs and a diminishing sales presence overseas; yet the Premier has expertly spin doctored and bamboozled the public into a false optimism about the industry."

He added that the Island may not be able to rely on the construction industry to keep up the pace it has, explaining that current development was based on decisions made three yeas ago: "When the current spate of projects is finished, we have to ask: What then? Where will the next set of projects come from?

"With credit markets frozen, unless there are large government projects in the offing, this sector will likely cool, and contract with probable job losses."