Bermuda takes a mauling on tax

Thrust into a global tax spotlight, Bermuda, along with other UK Overseas Territories, has been indirectly blamed for everything from facilitating tax avoidance and evasion to poverty in the developing world and funding terrorism.

And — much to the chagrin of Premier Craig Cannonier and Finance Minister Bob Richards — the UK media has jumped on the bandwagon, branding Bermuda and other UK possessions as tax havens that need to be clamped down on.

Both the Premier and Mr Richards say they have been surprised at the lack of UK knowledge about Bermuda’s core business and its commitment to financial openness and transparency.

They spoke out after a summit in London for the Overseas Territories and Crown Dependencies prior to the G8 meeting in Northern Ireland earlier this week.

UK Prime Minister David Cameron, during Britain’s presidency of G8, vowed to tackle tax avoidance and evasion as a priority and wanted the territories to sign up to an Organisation for Economic Cooperation and Development/EU multi-lateral tax information exchange convention prior to the G8 meeting.

Mr Cannonier stressed the island was committed to information exchange — but said the island had concerns over some of the details and would not commit to the agreement until it had discussed them with the UK.

Jack Blum, a columnist in the influential left-leaning British newspaper The Guardian, led the charge.

He wrote: “That Bermuda may jeopardise a major international agreement that’s trying to crack down on tax havens is a bad joke.”

He added that a recent White Paper on the future of the UK’s Overseas Territories said that the UK parliament has “unlimited power to legislate for all its overseas territories and Crown dependencies.”

He added: “The unvarnished truth is clear. If David Cameron wanted to, he could force Bermuda to fall into line and simultaneously put Britain’s house in order.”

Mr Blum also wrote: “Bermuda really is utterly dependent. It relies on its relationship with the US and the UK for everything.”

He added: “The Bermuda economy lives and dies on its connections with the City of London and the American financial system. To end Bermuda intransigence, all the UK needs to do is refuse to recognise the legitimacy of Bermuda corporations and cut off Bermuda connections to the UK insurance market.”

And he claimed: “It makes a living by preventing the rest of the world from seeing the amount of money siphoned out of the global tax system by exotic fictional schemes.

“If these spurious avoidance and evasion schemes were exposed to public view, the body politic of all the nations that have been pushed into austerity by a lack of tax revenue would force immediate and radical change.”

Mr Blum added: “We still do not have all the facts on the insurance schemes, private pension schemes, protected cell companies and other related fictional tax exotica that make profits become losses, ordinary income become capital gains and make other income disappear entirely.”

He ended: “Let us force Bermuda to open its doors and windows to sunlight and see how real democracy reacts to what we see.”

A

ndrew Rawnsley, writing in the Sunday newspaper, The Observer, does not single Bermuda out — but he said that Britain’s territories were tax havens, helping to fund terrorists through shell companies and depriving developing countries of income.

He wrote: “When roughly one in five of global tax havens are the responsibility of the UK — more than any other country – he has to get his own house in order first if he is to be taken seriously on this subject by other G8 leaders or anyone else.

The US-based Global Financial Integrity website on Tuesday described Bermuda and other Overseas Territories as “notorious tax havens.”

And its article quoted its legal counsel and director of government affairs Heather Lowe as saying: “While we’re happy that the G8 acknowledges aggressive tax avoidance and profit shifting is a problem, they failed to agree to curtail it in any meaningful way.

“This is one area where coordination of changes to legal systems is essential to combat the problem and public reporting by companies of revenues, profits, losses, taxes paid and number of employees in each country in which they operate is necessary in order to see whether those measures are having the desired effect.”

And Richard Murphy, who runs Tax Research UK, quoted an OECD report on tax released earlier this week, which said that “offshore tax evasion was “a serious threat to jurisdictions around the world”.

The OED report added: “Cooperation between tax administrations is critical in the fight against tax evasion and a key aspect of the cooperation is exchange of information.”

Mr Murphy said: “It says that for all the protestations we hear from the Crown Dependencies and Overseas Territories and many other places that they are not tax havens is just wrong: They are.”

And he said that banks which facilitated the transfer of funds and who operated in “tax havens” also needed to be cracked down on. n