Vexed Bermoothes

I’ve been critical of Government’s silence regarding what it plans to do to protect Bermuda’s interests amidst the tax-haven scapegoating going on amongst global leaders.

Finance Minister Paul Cox finally gave a statement today in Parliament which answers some of those questions:

“President Sarkozy and other European leaders from the G20 have said that they will crack down on tax havens as they seek to boost transparency and to apply uniform rules governing financial markets in the wake of the global economic crisis. I remind the House that on 28th November 2008, Jeffrey Owens, Director of the Centre for Tax Policy Administration at the OECD, favorably mentioned Bermuda as one of the jurisdictions which upholds its obligations under tax information exchange agreements (TIEAs).  He pointed out at that time that only seven centres, including Bermuda, were fully compliant with OECD transparency standards.

Mr. Speaker, of special note in 2008, an OECD sub-committee recommended that the new standard for countries is to have a minimum of 12 signed TIEAs. This is in order to advance the tax information exchange network and to demonstrate a commitment to transparency.”

To summarise, she says:

• Unlike those other countries that are rushing about now to sign TIEAs (yeah, we’re looking at you Switzerland), Bermuda is no Svennie-come-lately to TIEA compliance having signed its first agreements with the US in 1986 and 1988 and participating in the OECD working group that created the OECD Model TIEA in 2002;
  
• To date, Bermuda has signed three TIEAs with the US, Australia, and the UK;
• Next month, she will sign 8 more with the Nordic Group countries and with NZ;
• And they hope to sign one with Germany soon too, and are now talking with 2 other EU states; and
• They are speaking with the EC about how the EU Savings Directive might be implemented here (Bermuda being one of the few holdouts).

She also tries on this argument – which is rather clever and certainly true – but unlikely to appease many onshore critics.

Bermuda is not one of those countries that has designed its fiscal regime to attract international business.  Bermuda’s consumption-based tax policy has been in place since the 19^th century. This regime is a credible tax regime which raises substantial tax revenue proportionate to our key foreign trade partners such as the US and Canada.  In Bermuda, the ratio of total Government tax receipts in relation to GPD was approximately 17.8 per cent in 2007. For the United States and Canada this ratio was in the range of 19.5 per cent to 20.5 per cent of GDP in 2007.

Bermuda’s been playing square with the regulators for a long time.  However, it’s the politicians who are the problem – lumping us in with offending jurisdictions out of populist enthusiasm.  The Bermuda Government seems to generate a release-a-day to inform the world of Dr. Brown’s latest feats of spin:  why are we not communicating our business message more clearly?  I mean, really?!

I encourage Government to continue to be more forthcoming like this with facts – instead of the normal Gold Standard™ waffle.

Moreover, the Bermuda Government must begin some concerted steps to mend bridges with the international business community here.  It’s nice that the Premier knows how to make a Harvey Wallbanger, but it would be good for all of us if he spent some time understanding the needs of the business world as well.