A Government fee on every virtual transaction in Bermuda would "sound the death knell'' for e-commerce here, outraged industry experts said yesterday.

And many in the field feared such a move -- which E-commerce Minister Renee Webb floated as an option this week -- would simply drive the industry and all its lucrative benefits for the community far away.

One businessman -- who did not want to be named -- described her disclosure of the fees at a Chamber of Commerce breakfast power seminar on Wednesday as a "clanger'' that left many of the 140 audience members stunned.

Yesterday Ms Webb distanced herself from the controversial comments, reassuring the industry that "extensive consultation'' would take place before such an e-tax was set in stone.

"I identified that revenue could, theoretically, be generated directly, and noted that one way to do this would be via a nominal transaction fee. There are, of course, means for generating revenue from the sector indirectly also, amongst them via payroll taxes and customs duties.'' E-commerce company, First Atlantic Commerce, president Greg Vasic said any transaction fee could send a "destabilising message to the international business community about the Government's intentions''.

Without the fees, indirect revenue like payroll tax, company fees and import duties would flow to the Government from the sector which even in its "embryonic stage'' employed at least 50 people in Bermuda, he said.

"It's worth noting that Internet commerce merchants are among the most mobile businesses in the world and can pick and choose their domicile more easily than any other business. This is the reason Bermuda is experiencing a high growth in this area.'' Business pans e-commerce tax He said as any field of business flourished there were "multiple ripple effects throughout the economy'' bringing money in.

After hearing the Minister's initial comments on the fees, the CEO of e-commerce provider EOCnet.com, Granger Whitelaw, scheduled an emergency meeting with the Minister.

Last night he said he had been "extremely concerned'' about the initial proposal but his hour-long meeting with Ms Webb yesterday had reassured him.

Charging a fee for every transaction while the sector was in its infancy was like cutting down a seedling for firewood, he said.

"E-commerce transactions will involve tiny profit margins to begin with so a tax on the notional value of the transaction could be very material.

"If we tax the outside people coming into Bermuda with their e-commerce transaction they will simply go somewhere else.'' He said he would prefer a tax on service providers like his own company so it would not taint the "outside world's'' view of Bermuda -- but it was vital the private and public sectors worked hand in hand to draw up such charges.

Shadow Finance Minister Grant Gibbons said Ms Webb's floating of the idea left him concerned she did not understand the virtual industry.

And without the fees many onshore companies would first set up "e-suites'' in Bermuda, before graduating to incorporating a company.

That process would be a lucrative source of income for the Government, as it was in the insurance industry when onshore companies formed rent-a-captives as a "first step'' before going further.

Internet service provider North Rock Communications spokeswoman Vicki Coelho said if e-commerce flourished the Government would automatically pocket extra cash since telecommunications carriers paid between three and six percent of their gross revenues directly into Government coffers.

And the increase in Internet traffic that would accompany the growth of e-commerce would see that revenue swell.