Government is owed nearly $31 million in tax and pension arrears says Auditor General Larry Dennis who fears some of the money may never be recovered.

He said the slow and non-collection of significant amounts of pension contributions and payroll taxes continued to be a major concern and was getting worse.

In 2003 fees more than three months in arrears included pension contributions of $9.2 million, payroll taxes of $16.2 million and land taxes of $5.7 million.

He said: "For the Government and its pension fund to be owed more than $31 million of taxes and pension contributions more than three months in arrears is, in my view, intolerable.

"Not only should this amount be in the Government's bank accounts but some of it will inevitably not be collected at all."

"Instead of improving, systemic deficiencies in collection procedures and attitudes are allowing the situation to deteriorate.

"In my opinion, these deficiencies and attitudes have already bred a culture in Bermuda wherein businesses and others view the payment of amounts owing to Government as optional, avoidable or evadable.

"This culture was again illustrated recently by the public revelation that material amounts of parking fines remain unpaid because people have learned and public prosecutors know that payment is not being enforced.

"When past-due debts reach their present magnitude, they are a drain on Government cash flows, they increase borrowing costs and the risk of lost revenues and, in the case of pension contributions, they diminish workers's pension benefits."

He said employees should not assume that because pension contributions had been deducted they were entitled to pensions.

"If their employers do not remit the pension contributions to Government, there is no pension entitlement.

"By failing to enforce payment of pension contributions, Government is in effect working against the interests of employees of dubious companies, resulting in deadbeat employers defrauding workers of their pensions.

"Government needs to become serious about enforcing the legislature's laws and requiring prompt remittance of taxes and pension contributions.

"Unless and until it does, arrears will continue to soar and the impact of restricted pensions will be felt increasingly by Bermuda's retirees."

He urged the Ministry of Finance to be more aggressive in collecting contributory pension fund contributions.

"Failures by employers to remit pension contributions should result in penalties being levied and in extreme cases be viewed as criminal acts requiring remedies under the criminal code."

He reported there had been some action on this with the Department of Public Prosecutions starting to prosecute offenders.

The Department of Social Insurance responded in Mr. Dennis's report that it continued to search for ways to increases effectiveness of debt collection and made sure training of its officers was up to date.

Mr. Dennis said the department should increase magistrate's court action and resume sending large accounts requiring Supreme Court action to the Attorney General's chambers and seek more visible support from the Finance Ministry to ensure more timely legal action.

The Department agreed, promised talks with the Attorney General's chambers and has resumed referring accounts over $10,000 to the AG's chambers in the hope of improving legal action against delinquent debtors.

The Department has also increased liaisons with TCD and the Department of Immigration which had improved matters while links were also being made with other departments.

The Acting Director of Social Insurance agreed with Mr. Dennis's call to charge interest on arrears and said it was working out a method.

But the Acting Director said there was limited resources to change an already complex system.

The Auditor General blamed a lack of political will and an inefficient computer system for the $22 million backlog in payroll and land taxes which damaged cash flows.

However he said although the IT problems had been identified other departments got priority.

Top Five Pension Arrears (more than 90 days) 2003

First Choice Construction $229,477

Hamiltonian Hotel and Island Club $210,233

Just Cleaners $172,098

Darrell Contracting Services $151,906

Health Tech Ltd $147,466

Top Five Payroll Tax Arrears (more than 90 days) 2003

Precision Engineering and Technical Co Ltd $435,862

Hamiltonian Hotel and Island Club $417,747

Canber Saber Ltd $373,983

Fine Touch Construction and Maintenance Ltd $367,305

The Elliot Street Ltd $314,808

Land Tax Arrears (more than 90 days and over $40,000) 2003

Hamiltonian Hotel $237,795

Bermuda Transportation Co. Ltd. $145,956

David and Donna Dunkley $101,609

Tony DaCosta $67,140

Wendell Pond $59,634

Rodger Raynor $53,370

Conrad Henry $46,303