extended to reflect the value of benefits, as well as cash. The tax base becomes that which was formerly the basis of the employment tax, and the quarterly frequency of payment is retained.

Certain employers will only be charged an amount equal to the maximum amount which they may withhold from their employees such as registered charities, Parish Councils and religious bodies.

Those employers currently enjoying benefits under Employment Tax such as sports clubs will continue to enjoy special rates under the new scheme approximately equal to their current benefits. However, these rates will be subject to regular review and changes made with the anticipation that some anomalies will be gradually eliminated.

Self-employed persons will be treated as at present and will be required to assess notional remuneration on which tax will be charged at the rate applicable to the nature of their business.

International companies will continue to enjoy a similar beneficial position to that which they enjoyed under the Hospital Levy. For the purposes of the new tax they may choose to report either on actual salaries, or on an assumed remuneration figure assessed against each employee. Depending on the reporting method chosen, withholding may be made from each employee to the extent of his or her actual remuneration, or to the maximum of the assumed amount, but not above it. Historically, the level of assumed remuneration has been indexed to movements in the CPI for the previous year. Based on a review of the industry it seems clear that a readjustment upwards of this figure is appropriate as a result of increases in salaries paid by international companies. Therefore, for 1995 6 the assumed remuneration level will be set at $66,000 per annum.

Mr. Speaker, this new single Payroll Tax will be more easily understood than the two taxes currently charged on employers and accordingly should relieve much of the current administrative burden on employers, both large and small.

It is estimated that the measures will raise an additional $7.8 million.

Government is dedicated to assisting small businesses to flourish.

Accordingly, the current exemptions granted small businesses will be considerably increased in order to support and to further aid such enterprises.

As part of the programme to assist small businesses the capitalisation of the Small Business Development Corporation will be increased to provide for a doubling in the level of guarantees made by the Corporation.

Mr. Speaker, reference was made earlier to the steadily reducing percentage of total revenue being received from Customs Duties. A significantly growing element of our economy by contrast is the provision of services to both international and local company business and the substantial fee income now being earned by the providers of services to international business in particular. While such service providers are contributing through payroll tax to the overall benefit of the country, and, more importantly, providing employment, it is evident from industry data that fee income has been rising faster than returns in any other form of economic activity. As a consequence a substantial benefit from the international business presence on the Island is being enjoyed by a comparatively limited number of entities.

Therefore, it is proposed to require those persons who provide corporate services to those exempted undertakings that do not have a physical presence in Bermuda to pay an annual fee of $400 to Government in respect of each such undertaking. "Corporate services'' will include the provision of a registered office and secretarial and directors' services for a fee. The measure will raise an estimated $2.9 million.

While the annual fee payable for a banking licence has been steadily and substantially increased over the past six years, it is considered appropriate to increase this fee this year. In the absence of a profits tax a fair and reasonable annual bank fee is not inappropriate. Accordingly, the annual licence fee for each of the two major banks will be increased to $1 million while the fee for the other bank will be raised to $150,000. In addition, each deposit company is to have its fee increased from $5,000 to $10,000 per annum.

Mr. Speaker, there can be little doubt that professional persons who are afforded the special legislated protection of registration in order to practise their profession are in a very privileged position. Hence it is intended that the associations of professional persons shall pay an annual fee to Government in respect of each registered professional in their group. The fee will vary from $50 to $2,500 per annum according to the nature of the profession. The Government will be presenting an amendment to the Miscellaneous Taxes Act 1976 to implement this Profession Registration Tax.

This amendment is intended to take effect in January 1996 and will raise an estimated $1 million.

This year it is proposed to abandon the discount previously extended on payment of land tax, as this feature of the tax is no longer considered appropriate. However, there will be no increases in Land Tax rates in this Budget.

It has become obvious that there is a need to tighten certain procedures as they relate to one specific aspect of Stamp Duty. For many years the opportunity has existed to voluntarily convey real property and to discount the affidavit of value heavily by taking into account the value of any mortgage attached to the property. This provision has resulted in substantially reduced amounts of Stamp Duty being paid on the transaction and the procedure has led to a great deal of abuse. It is intended to close this loophole by ceasing to give the allowance in future. Accordingly, the Stamp Duties Act 1976 will be amended to provide for this result.

There will also be certain increases in Stamp Duty rates applicable to affidavits of value in respect of deceased estates, to conveyance or transfer of land and to conveyance or transfer of Bermuda property into trusts or settlements.

Mr. Speaker, it has become clear that while Government has deliberately set certain residential properties in a category which allows them to be acquired by non-Bermudians upon payment of a fee by the purchaser to Government, it is also clear that such purchasers and especially their beneficiaries have been able thereafter to enjoy the benefit of any gain in values attached to any such property when it is resold. It is intended to impose a 10 percent Stamp Duty on the gain in value on the resale of such property with the duty being paid by the vendor. This step will ensure that a portion of the benefit of any increase in the value of properties in Bermuda is retained on the Island when any property is sold by a non-Bermudian.

It is further intended to amend the Stamp Duty on lease agreements on residential properties with rental values of $1,200 per month or more. The revised Stamp Duty will range from $75 to $300, from the current flat rate of $50.

The combined charges in Stamp Duty are estimated to raise approximately $3 million.

Currently, the Hotel Occupancy Tax is charged on licensed hoteliers in respect of the rack rate charge made to guests in their establishments, i.e. the amount charged for accommodation. It appears, Mr. Speaker, that hotels have over the years added a number of items to the guests bills below the line which have not been subject to tax. The Hotel Occupancy Tax will be amended to ensure that these items are subject to the tax. On the other hand, the rate of the Hotel Occupancy Tax will remain at 6 percent which is one of the lowest among our competitors.

The Minister of Transport will shortly announce details of certain increases in the licensing fees for motor vehicles.

In 1994 the Government announced its intention to introduce pensions legislation and appoint a Pensions Commission and a Pensions Commissioner.

This objective is being actively pursued and Government has begun to consult widely with the community on the principles involved in the matter of a National Pension Plan. As a consequence, a Green Paper on Pensions will be laid before this House later this session. Following a public discussion on the Green Paper the necessary legislation will be introduced in 1996, with the implementation date set for early 1997.

Mr. Speaker, I wish to conclude this, my seventh Budget, by expressing my personal thanks to the scores of people who have given of their time and expertise over the past year in working with me and Ministry of Finance officials, and who have, in an indirect way, helped in crafting this 1995 Budget Statement.

In addition, the Government is indebted to those individuals and organisations who have demonstrated a grasp of the economic problems associated with the Base lands takeovers and who are working on the complex long-term plans which will ensure the economic viability of the whole enterprise. The people of Bermuda are grateful to all of those persons who have so willingly given of their time and expertise in serving on the Committees associated with the Bases transition.

Mr. Speaker, there is a perception in some sections of the community that the Bases issue represents an even bigger problem for Government than the recession which recently beset Bermuda.

Although arguably a more complex problem than the recession, the Bases issue, ironically, is less problematic.

Whereas four years ago the Government was able to forecast and prepare for the impending recession, it is a fact that the Government was not in a position to say how long the recession would last or to predict how adverse the effect would be on the economy. However, throughout the three years of major economic uncertainty, and declining GDP, Government's fiscal policies, as well as its carefully managed social policies and capital spending programme, were effective in maintaining the underlying infrastructure and helped to stabilise the island's economy.

Today, by comparison with the uncertainty of the recession, the handover to Bermuda of the Base lands, again a problem not initiated by Government, has to be seen as a challenging opportunity. While the initial costs of the takeover appear comparatively huge and have created some anxiety in the community, a degree of control of events exists today which clearly was not present during the recession. Hence, managed skillfully, the return of these genuine capital assets will unquestionably generate both jobs for Bermudians and foreign exchange for the country for years to come.

Therefore, the additional taxes we are required to raise now must be seen as an investment in the country's future. We are, of course, assisted by the fact that the country has moved out of the recession. In addition, at the end of June 1994 GDP had risen to $1.86 billion and is continuing to grow, thus providing solid support for the substantial increase in Government expenditures which will be required to run the Airport and provide for the future development of the remaining Base lands.

Mr. Speaker, for the last six years each Budget has seen the Country's tax structure and revenue raising methods made progressively more effective, more fair and more reasonable. This Budget is clearly no exception. It has been specifically designed to avoid any heavy tax increases which might have unduly affected the man-in-the-street, while those taxes which have been introduced will be largely shouldered by those who can best afford to meet the additional revenue demands now facing the Government. In addition, since everyone on the Island benefits from the operation of the Airport and will benefit in the long term from the development of the Base lands, the requirement for each of us to contribute to them through the revenues raised by the Payroll Tax must also be seen as both fair and reasonable.

This Budget is one which will have minimal impact on the rate of inflation and, further, is one which has been carefully framed so as not to undermine Bermuda's competitive position. It should be clearly noted that there have been no increases in the land tax rates, or in the duties on gasoline, fuel oil, alcohol or other significant duty earners: to have introduced any such increases this year would have been inflationary.

Mr. Speaker, the 1995 6 Budget will place Bermuda in a very sound financial position, and hence will enable the Government to deal with the unique economic challenges that the country will have to contend with over the next few years. As a result of the measures put in place today I have little doubt that Bermudians can face the future with confidence.

I end by stating what ought to be obvious to us all -this Island is one of the best places in the world to live in, to visit and in which to conduct business. Our individual and collective duty is to ensure that it remains that way.

ON BUDGET -- Finance Minister the Hon. David Saul explains the 1995-1996 Budget at a Press Conference at the Cabinet Office yesterday.

CHARTS show Government's revenue and spending for the last ten years. Figures for 1994-95 and 1995-96 are estimates.

GROWING DEBT -- Government debt and interest payments -- are expected to grow in the next year.

TAXES TAX