Increases in the exempted company fee categories will vary from 0.89 percent in the lowest category, which rises from $1,680 to $1,695 per annum, to six percent in the highest category. It should also be noted that the penalty for late payment of the annual exempted company and partnership fees will be increased also, from $200 to $300, to address a trend that has developed in recent years.

The staffing and systems needs of the Registrar of Companies office currently under review will have to be supported. Fees may in time require adjustment to support necessary regulatory and administrative changes. Similarly, licence fees chargeable under the draft Investment Business Licensing legislation will help to support adequate regulatory staffing at the Bermuda Monetary Authority. Bermuda cannot maintain its pre-eminent place in the offshore financial world without sufficient resources being allocated to its regulatory bodies.

Following a detailed review of cruise ship policy and consultation with cruise lines and agents, Government has given careful consideration to the nature of the economic benefits and costs of bringing cruise passengers to Bermuda. As passengers are housed and fed aboard ship and a substantial portion of the cruise passengers' spending while in Bermuda accrues to the shipping line, Government has decided to bring into effect a tax payable by the cruise ships in respect of the number of passenger cabins on each ship. The tax will be $8 per cabin for each night that the ship is berthed in Bermuda and is expected to generate a total of $1.6 million in its first year. The tax will apply in full between May and August in any year but will be halved to $4 in September and October and generally will not apply at all between November and April.

Mr. Speaker, the Budget of 1997-98 announced an external, high-level review of the components of the Island's tax structure. After a careful selection process, this review began in November, 1997, and is expected to be completed in April of this year. The review, being undertaken by Mr. Harry Gutman of the American law firm of King and Spalding and Mr. Eric Toder, an economist formerly with the US Treasury, is designed to ensure that our tax system is keeping pace with a changing economy and is efficiently and equitably balanced. It is an appropriate time to conduct the review in the light of the structural changes occurring in our economy, particularly in the tourism and international business sectors. This review is expected to benefit the Island considerably, as it will not focus on one narrow sector of the economy, but will take into account the broader issues and linkages as well as perceived conflicting interests that need to be addressed. It is fundamental to Bermuda's future success that economic and fiscal policies are in place that encourage market forces and maintain business confidence.

In that context, much has been said about Corporate Services Tax since its introduction. It is fair to say that in their review the consultants are taking a careful look at this tax to determine whether a broader-based services tax could be considered as its replacement.

The impact of customs duties will also be reviewed by the consultants. The retail sector has offered a number of proposals for consideration, including the establishment of a bonded warehouse system where importers may store their goods until they need to remove them for sale. Government will hold this suggestion in abeyance until the final report is presented, but notes that it has potential to assist retailers. Government will continue to work with retailers as they continue to improve their competitive position.

In previous Budget Statements I have referred to tax-specific reviews that have been commissioned. The Land Tax review has been completed, and our consultants have endorsed fundamentally the rental valuation procedures currently in place that produce the tax base. The Stamp Duty review is under way and will continue for some months as the consultant works closely with the Accountant General.

Mr. Speaker, in the coming year the Ministry of Finance will closely monitor efforts to ensure that taxpayers' dollars are spent wisely and efficiently.

The 1996 Oughton Health Care Report raised the alarm regarding the escalating cost of health-care, a burden impacting senior citizens, families, businesses and Government. In 1996, health-care costs consumed some four percent of the average Bermudian's income; this is expected to double to eight percent by the year 2010. Health-care costs as a percentage of GDP have risen from 7.3 percent in 1991 to approximately 11 percent in 1997. The Government recognises the urgency of containing health-care costs. To that end, the Ministry of Finance will work closely with the Ministry of Health, the Bermuda Hospitals Board and our health-care consultants to implement a strategic plan to contain costs while maintaining quality and guaranteeing access.

Our total investment in education in 1998-99 of $97.4 million now represents 18 percent of the Budget, and we must make certain that these resources are managed productively. The recent audit of the Department of Education highlighted a number of opportunities to improve the delivery of education.

This year, the Department of Management Services will assist the Ministry of Education in improving efficiencies.

Mr. Speaker, this Budget has addressed our social safety net in relation to health-care, education and pensions. In the coming year, the Ministry of Finance will work with the Bermuda Housing Corporation and the Department of Financial Assistance to ensure access to affordable housing for those with demonstrated need. At the same time, we must ensure that within the existing programmes, incentives are properly aligned to discourage a culture of dependency.

Mr. Speaker, in 1998-99 the Ministry of Finance will continue to create a fiscal and legislative environment that will enhance the competitiveness of our business community, provide appropriate regulatory oversight and encourage economic growth and diversification. In the coming months, the Investment Business Licensing Bill, currently circulating for discussion in the private sector, will be tabled in the House of Assembly. The Bill will set the standards of operation for this growing business sector, recognise legitimate investment services and provide consumer protection. In addition, refinements that will strengthen our trusts and partnerships legislation will be introduced, as will amendments to our insurance legislation that support risk securitisation.

The Basle Core Principles, a set of international supervisory provisions for banking institutions, were adopted in 1997 by the G7 countries. Bermuda has agreed to these provisions, and amendments will be made in the coming year to all deposit-taking legislation so that our financial institutions and the Bermuda Monetary Authority can demonstrate adherence to best financial practices.

Substantial opportunities for Bermuda to diversify and provide services in the areas of information technology and electronic commerce are developing as a direct result of globalisation. A review of Bermuda's laws pertaining to copyright and trademarks, mentioned in last year's Budget, has been completed by the Registrar General in co-operation with a consultant from the Commonwealth Secretariat. This review will be used to bring our legislation into line with UK and European Community standards.

Moreover, Bermuda has an opportunity to build on this core legislation and existing international treaties to create a unique environment that will facilitate the development of an information technology services sector. The Ministry of Finance will work with the Bermuda International Business Association and a specialist consultant to define the legislation required and target service opportunities in such emerging fields as web-based electronic commerce, secure financial services, data warehousing and information service centres in telemedicine and on-line education. These opportunities will be further enabled by our increasingly sophisticated telecommunications infrastructure and the development of a business/technology park at Southside.

Mr. Speaker, I began this Budget Statement with reference to a 30-year record of outstanding economic performance that has led to remarkable opportunity, prosperity and quality of life for all Bermudians. Setting out from our secure base, I believe Bermuda's long-term potential is almost unlimited. With sound economic stewardship and the steady application of proven fundamentals, Bermuda's economy will continue to grow. With vision, new economic sectors will emerge, creating new jobs and types of jobs for future generations. With preparation, a commitment to hard work and a spirit of common purpose, Bermudians can seize the opportunities of the global economy and a future that holds great promise for all.

In closing, Mr. Speaker, I would like to acknowledge, once again, the significant contribution to the preparation of this Budget by the officers and staff of the Ministry of Finance, as well as other Government Ministries.

Their dedication, experience and professionalism will be essential to Bermuda's continued success in the global economy and the challenging new century ahead.

HOUSE OF ASSEMBLY HOA