Vexed Bermoothes

The BBC reports on the global squeeze on tax havens:

As the credit crunch threatens worldwide recession, the patience of the great democracies in America and Europe, including Britain, to tolerate tiny microstates like Liechtenstein continuing to undermine their tax-raising powers may be ending.

But 18 of the world’s tax havens are Crown Dependencies like Jersey, Guernsey, the Isle of Man or British protectorates like the Caymans, a fag-end of the British Empire in the Caribbean.

One man has targeted tax haven abuse in the Caymans – and his name is Barack Obama. So change for the world’s tax havens seems on the way – whether the leaders of the micro-states like it or not.

Bermuda insists that it is miscategorised as a tax haven (and lord knows, those of us who live here know we pay heavy taxes).

Our Government says it is working with international bodies to ensure that our regulations are up to par … while balancing the concerns of our international corporate clientele.

But this leads to a conundrum.

Bermuda “exempt companies” receive an undertaking from the Minister of Finance that the company will not be subject to any tax or duty on profits and certain other activities of the company.  In the past, the expiry date of the exemption has periodically been rolled foward – with the current one expiring in 2016.

• Bermuda’s international companies will soon be looking for some certainty that the exemption will be maintained past 2016, or what will replace it.
• At the same time, international bodies like the OECD are likely to vomit if Bermuda does extend the exemption window.
• And Bermuda’s footloose spending habits are hungry for new revenue streams.

There are a lot of competing interests to serve here.  Missteps will have awful consequences.  Government had best start speaking honestly about how it intends to proceed.