Country should be ready for tax hikes.

"Everyone knows we've got additional expenses -- for example, the Bases, including the Airport,'' Dr. Saul told The Royal Gazette . "Everyone is going to benefit from this, so everyone is going to have to gird their loins to pay.'' At the same time, Dr. Saul said he recognised the Island was emerging from a recession and "you can't get blood from a stone''.

In preparing the Budget to be handed down in the House of Assembly on February 15, "I am trying to contact Solomon and get some wisdom'', the Finance Minister said.

The Budget would be "as fair and as reasonable as we can be, under the circumstances''.

The 1994 Budget projected expenses of $358.1 million and revenues of $385.2 million.

Dr. Saul would not say how much extra expenses Bermuda faces compared to last year. But the air operations contract alone will cost Bermuda more than $4 million a year, and an Airport infrastructure contract that is yet to be awarded could cost a similar amount. Government is hoping to offset some of the increased costs through Airport user fees.

Despite the pressure from Base costs, Dr. Saul did not expect his sixth Budget in February to be his most difficult.

"Although they are unknown and unquantified, the Base costs are much more predictable than the recession was in 1990,'' he said. It was known a recession was coming, but it was "anyone's guess as to its depth and its duration,'' he said.

"The Base takeover, comparatively speaking, is much easier with less guesswork involved.'' While the recession adversely affected Government revenues, the Base takeover would have a negative effect on expenditures, he said.

Outside of tax increases, Budget speculation could centre on whether Dr. Saul further relaxes Bermuda's exchange controls.

In 1994, interest rate ceilings were lifted and the ten percent overseas investment tax was abolished. But the $25,000 annual limit on overseas investment was retained.

Any major move to ease exchange controls is not expected to occur until after the Independence referendum planned for next summer.

The Hon. David Saul