currency purchase tax on small transactions than Government will see in revenue, bank officials said yesterday.

And both the Bank of Bermuda and Butterfield have raised new complaints about the Budget increase in their bank licence fees from $170,000 per year to $500,000.

The claims about collection costs of the new tax came in the Bank of Butterfield's quarterly letter to shareholders from chief operating officer Mr. Scott McDonald.

But Finance Minister the Hon. David Saul said the claim was unjustified because of the small number of foreign currency purchase for amounts of $100 or less.

Mr. McDonald said: "The imposition of a 0.25 percent tax on transfers from Bermuda dollars to foreign currency has no minimum stipulated, and on a purchase of $100 the tax will be only 25 cents.

"Your bank has calculated that on foreign currency purchases of this size and below, the cost of collecting the tax will exceed the amount collected by a multiple of several times.

"Again it is the banks who are charged with the burden of collection whereas, in contrast, the burden of collection of Value Added Tax or General Services Tax in other countries is spread across all business and professional sectors.'' But Dr. Saul said the cost of collecting the small amounts of tax from minor exchanges was outweighed by the larger revenue raised from higher purchases.

And he said the tax, which has also been criticised by the business community, would be reviewed at the end of the year. It was introduced on April 1.

But Dr. Saul said: "What we are going to do is wait for a year and see how it goes, I think they will see that they will not be making many changes for $100 or less.

"If you installed a minimum, such as $100, what would happen is people would buy one draft at one bank for $99 and another at another bank for $1.'' Mr. McDonald also criticised the increase in the bank licence fee.

"The huge jump in licence fees has been justified on the basis of profitability and the absence of any kind of profit tax in Bermuda.

"These arguments give rise to concern because there are many other forms of business activity in Bermuda which are profitable, and to single out the banks alone in this fashion is the thin edge of a highly discriminatory form of taxation,'' he said.

Bank of Bermuda president Mr. Donald Lines also criticised the licence fee increase, saying it discriminated against companies which published their results.

Dr. Saul said the bank licence fee was unlikely to be increased for a number of years.

"It is not there just because the banks make profits,'' he said. "It is there because they have a licence and they do make profits.

"It is fair and reasonable for a basically protected licence from which the banks do extremely well.''