GOVERNMENT plans to make company directors personally responsible for unpaid taxes and pension payments have been slammed as unfair, unworkable and "draconian" by business leaders.

Legislation tabled in the House of Assembly last Friday will enable Government to haul company directors before the courts for unpaid contributions dating back 20 years.

According to the latest figures, companies currently owe $27 million in unpaid taxes and a further $2 million in outstanding pension payments.

Opposition MP John Barritt said the new legislation's retroactive clause could make newly appointed directors personally liable for non-payments dating back years.

"Directors, who weren't aware that taxes and pension deductions weren't being paid, and whose statutory responsibilities at the time did not include making sure that they were, can now be held personally liable," the MP said.

Yesterday Chamber of Commerce President Peter Everson said his organisation was surprised at the development as it had not been discussed in previous meetings.

He added that the retroactive move could strangle new business development, and possibly be challenged in the courts.

"Earlier this year we held discussions with the Ministry and made suggestions as to how the current measures could be reduced and what measures were needed to prevent areas in the future ? these discussions did not include the measures tabled in the House last week," Mr. Everson said.

"We believe other measures would be superior and we were surprised because we were not consulted prior to the legislation being tabled. We therefore want to discuss with the Minister how these important issues can be addressed.

"At our previous meeting suggestions we put forward included destroying the impression in the community that the Government is a cheap source of financing. This could be done by increasing the penalty for late payment so that it's higher than the banks."

"It appears that it empowers the Attorney General with the management of collection so all this really does is move it from one Government group to another, when really it should be pushed back into the private sector."

Asked what effect the new law will have on business, Mr. Everson said: "It will reduce the pool of people willing to serve as directors of companies and that will be harmful, particularly to start-ups."

And asked about the new law's retroactive clause, he said: "I believe lawyers will have opinions on that ? it's highly unusual for Government to make laws retroactive."

"The Minister and Permanent Secretary are both away from Bermuda at the moment but we will be seeking to hold discussions with them on their return.

Bermuda Employer's Council executive director Martin Law also expressed concern.

He said he believed the law would not make current directors responsible for old debt, but still described it as "draconian".

"It's a bit of a surprise at the speed at which it has been put through ? we have not had a lot of consultation on this," he said.

"Our organisation is in favour of best practice and there is no way we are going to ever condone a situation where people have not paid their taxes. In principle we don't have any argument with it.

"However, it's the retroactive aspect that is cause for concern. It seems very draconian and it's unusual to have legislation that has this kind of reach-back. It's difficult to say what the impact is going to be but we would have preferred legislation that was going forward. We feel that there are other things that could have been considered."