Bermuda has been working diligently to remove itself from a list of tax havens released last month by the Organization for Economic Cooperation and Development, Bermuda’s deputy premier said Monday.
“We resist and resent the appellation of tax haven,” Paula A. Cox told editors and reporters at The Washington Times.
“With a number of overseas territories, it’s easy to lump us all together,” she said. “But the Bermuda brand has cachet,” insisted Ms. Cox, who acknowledged that 15,000 international companies are registered on the 21-square-mile island that is home to 64,000 people.
All these companies have administrative services provided by Bermuda, said Ms. Cox, who is also finance minister of the island nation.
The White House unveiled a plan earlier this month that it said would raise about $200 billion over the next 10 years by curbing tax havens and removing tax incentives for shifting jobs overseas.
“Nearly one-third of all foreign profits reported by U.S. corporations in 2003 came from just three small, low-tax countries: Bermuda, the Netherlands and Ireland,” the White House said.
“Bermuda is a very efficient jurisdiction when it comes to the movement of capital,” said Donald Scott, financial secretary at Bermuda’s Ministry of Finance. Nevertheless, Mr. Scott acknowledged, “that number was a little bit startling.”
The OECD is a group of 30 wealthy nations determined to clamp down on what it considers to be rampant tax avoidance. To lift itself from the OECD’s tax-haven tier to the group of jurisdictions that have substantially implemented the internationally agreed tax standard, Bermuda must conclude Tax Information Exchange Agreements (TIEAs) with 12 jurisdictions.
On April 2, when the Group of 20 wealthy and emerging-market nations met at the London economic summit, Bermuda had signed three TIEAs since it reached its commitment with the OECD in 2000. Years of efforts bore fruit within the next two weeks, when Bermuda signed eight more agreements, leaving it one shy.
At least three more TIEAs will be signed with Germany, the Netherlands and Mexico within the next four to six weeks, Ms. Cox said, lifting Bermuda well above the minimum threshold of 12. Another agreement is pending with Canada. Bermuda signed its first TIEA with the United States in 1988.
It’s important that the higher standard be met, said Ms. Cox, because Bermuda has been hurt badly by the global economic crisis. Tourism is down 30 percent, she said, and major development deals have been deferred.
“The day after the tax-haven list was published” in early April, “we began receiving telephone calls from hotel developers,” Mr. Scott said. “Lawyers were calling.”
Ms. Cox said she was gratified that the Obama administration recently referred to Bermuda as a “low-tax country” rather than a tax haven.
Foreign corporations “pay the same taxes we pay,” including payroll taxes, property taxes and company fees, she said. “We don’t have income taxes on Bermudians or non-Bermudians or non-Bermudian corporations.”
Mr. Scott pointed to a study by the Brattle Group, a Cambridge, Mass., consulting firm, that concluded that one loophole-closing bill, which is aimed at Bermuda-based insurance companies, could have the “unintended consequence” of raising premiums for U.S. consumers by $12 billion.
The study’s conclusions were “untrue and do not reflect marketplace realities,” said the Coalition for a Domestic Insurance Industry, an organization of U.S. insurers led by Chubb Corp. and the Hartford Insurance Group.
“There is nothing punitive or unfair about the uniform treatment of all insurers writing business in the U.S.”