Shops are being hit by taxes, red tape, residents buying abroad and a lack of capable workers, said Mr. Roger Davidson, president of Smith's department store.

Mr. Davidson said customs duties caused high local prices that turned customers away, not mark-ups by store-owners.

He called on Government to scrap the duties. Prosperous professionals, like lawyers, bankers, accountants, doctors and dentists, should bear a fairer share of taxes, he said.

He also declared stores should have the same freedom to hire foreigners as other firms.

Mr. Davidson, also president of Bermuda Press Holdings which owns The Royal Gazette , spoke at the annual meeting of the Chamber of Commerce sales division on Thursday.

Last year had been another "bloody awful'' one for shops, he said.

"Figures are still being finalised, but there is no doubt that 1993 will show record losses because we were again faced with increasing expense that could not be passed on to the consumer because of the already strong resistance to high prices.'' The results of the losses could be seen in the appearance of some stores and a shift from up-market goods to "`T-shirts and tokens''.

This shift had led to "caustic comments'', but it was a response to changes in demand.

Mr. Davidson said an "independent group'' had studied the spending of 45 residents.

Nearly three-quarters of them spent 50 percent or more of their clothing budget abroad.

And only 16 percent honestly declared all their purchases to Customs.

Mr. Davidson said North American stores benefited from lower costs, less red tape, and a pool of young, well-educated workers willing to take near-minimum wages.

"It is pretty difficult for a Bermuda business paying $60 per square foot -- with no parking facilities -- to compete with a mall shop in the US paying $16 a square foot, surrounded by acres and acres of free parking.'' Bermudian merchants had "no pool of capable labour to draw on'', and did not have the same freedom to hire foreigners as other firms.

"If we had the same opportunity to employ competent outsiders as they have had, my guess is that we too would have participated in the prosperity they revel in.'' Local shop-owners paid about 63 percent more in employment costs than US storekeepers, he said.

They were also affected by "feather-bedding'' at local docks, with no working in the rain and "guaranteed industrial action every other spring''.

Retailers were having to cut back on decorating, Mr. Davidson said. And Government building regulations were leading to a boring international look.

The high price of goods sold in Bermuda was an even bigger problem, he said.

Before the last Budget it had been calculated that about 17 percent was added to prices because of duty.

"Except for a few selfish and greedy people, most Bermudians feel that it is high time for a more equitable spread of the tax burden.

"The argument that customs is an easy tax to collect totally ignores the obvious fact that eventually there will be little revenue coming from an industry which is on the verge of collapse.

"Contrary to popular view, local retailers generally work on a lower margin than their North American counterparts so there is little room for manoeuvre here.

"The obvious area has to be a phasing out of customs duty so the merchants can price the goods competitively and increase turnover as a consequence.

"This will most certainly result in greater income for the Island as a whole, because fewer dollars will need to be taken out by locals, and tourists will be encouraged to spend.'' Mr. Davidson told The Royal Gazette a "gross receipts tax'' might be needed to spread tax more fairly.

There were stores that would collapse without the support of banks, he said.

But professions which served international firms had built up their businesses without an accompanying increase in taxes.

"I don't want to create a them-and-us situation where they think we're out there trying to shift our burden onto them,'' he said.

He hoped Government would encourage the growth of the retail industry and enable the tax burden to be spread fairly without unnecessary hikes in rates for anybody.