The rising tax burden for the telecommunications industry could cost jobs and lead to lower capital investment, according to KeyTech Ltd., owner of the Bermuda Telephone Company and M3 Wireless.

KeyTech CEO Sheila Lines said that while she saw the need for changes to the industry's regulatory framework, she had concerns over the resulting costs.

As revealed two weeks ago by The Royal Gazette, industry representatives attending a workshop on the imminent changes were told that the industry's new Regulatory Authority would cost up to $9 million a year.

It will be funded from fees levied on the industry, whose companies and customers already pay around $12 million a year into Government coffers.

The new regulatory body will be created under two bills due to be tabled in the House of Assembly before the summer recess — the Regulatory Authority Act and the Electronic Communications Act.

"There is only so much tax burden this industry can bear. The cost of additional taxes will fall on jobs in our industry and reduced capital investment as our domestic market is not growing," Ms Lines said in a statement.

"We believe the benefits of reform to consumer welfare have not been quantified and compared to the additional cost and complexity for the industry."

Ms Lines went into further detail on the impact of taxations and fees on KeyTech's telecommunications companies, suggesting that after the proposed reform, more than half of their net income before taxes could be going to Government.

"We agree that change to the current system, which dates from 1986, is warranted," she said. "We are very concerned, however, about the breadth of regulation proposed and the additional costs, in time and money, that the industry will incur.

"KeyTech currently pays $3.7 million per annum in telecommunication licence and spectrum fees and a further $2.6 million in employers' payroll tax for its communications businesses. KeyTech's current effective corporate tax rate to the Bermuda Government for these two taxes combined is 37 percent of net income before taxes.

"It is proposed that the new regulator will charge fees to cover their newly formed administration costs, of up to three percent of revenues. If there is no reduction in the existing telecommunication fees contributed to the Government Consolidated Fund, KeyTech's combined effective tax rate will increase to 53 percent of net income before taxes."

BTC, part of the KeyTech group, said in March this year that it planned to trim its workforce by 25 to cut expenses. This followed the cutting of 20 posts by the company in November last year.

The legislation marks the culmination of a five-year process to reform the telecommunications industry and to abolish the licensing system that restricts the services that each company offers to a limited area.

The Ministry of Energy, Telecommunications and E-Commerce believes the reforms will lead to greater choice and lower prices for consumers, as competitors broaden the suite of services they can sell.

Others argue that the current system provides a competitive marketplace, which has allowed Bermuda to make huge strides in access to information communications technology in recent years.

There are also fears that the bringing down of the licensing barriers could herald a free-for-all that could result in the demise of some smaller companies and the jobs they provide.

Under the proposed legislation published last month, sweeping powers would be given to the new Regulatory Authority.

Some in the industry are concerned by the uncertainty over how the authority will use its powers.