Bermuda » Tax Research UK

The Conservatives show their true colours on tax havens: they’re what we should aspire to, they say

Bermuda, Conservatives, Secrecy jurisdictions, Tax Havens 9 Responses »

Apr 092011

Bermuda is the “jewel in the crown” of the British Overseas Territories and is not a tax haven, according to the UK Minister with responsibility for the Island.

Henry Bellingham, the Parliamentary Undersecretary of State at the Foreign and Commonwealth Office, told The Royal Gazettethat Bermuda’s economic success was the envy of many countries and that Britain might “do well to observe the successes of Bermuda’s fiscal system”.

Bermuda’s low taxes were a feature of its economic success, he added, and people who described it as a “tax haven” were missing the point.

“I think the whole argument of offshore havens has really run its course,” Mr Bellingham said. “I wouldn’t describe Bermuda as a tax haven, I’d describe Bermuda as being a very well run country that is able to have low taxes because it’s got a very strong economy that is able to deliver enough wealth and prosperity to supply services like schools, health, law and order all the essential services a country needs.

“It can do that within the context of a low-tax regime. Bermuda’s the envy of a lot of other countries. Those countries that go on about Bermuda and other countries being tax havens, I think, completely miss the point.”

He added:

“The UK could do well to observe very closely the successes of the Bermuda fiscal system.

“We believe strongly that each of the Territories should have the opportunity to pursue economic models that suit them and they have to do that in a very tough global economy. No business in the world owes anybody a living and no country in the world, be it the UK, Bermuda or the United States, has a right to expect businesses to come to them.”

Mr Bellingham added that he thought the UK made a net financial gain from its relationship with the Island.

“There are a number of world-class UK companies that have subsidiaries in Bermuda, or do business there because of the advantages of the Bermuda economy,” Mr Bellingham said. “That helps the UK businesses. If the UK insisted on higher taxes in Bermuda, or did what France did with some of her territories, that is integrate them into France so they pay the same rates of tax as France, that might be attractive in the short term but it would take away some of the unique advantages of the Bermudian economy.

“I think that the UK gets a lot of advantages out of Bermuda, because a number of our companies are making bigger profits as a result of the success of the Bermuda economy and that is helping the UK Exchequer. I would say that more than offsets the small cost for the UK of carrying out the commitments that we have.”

The article goes on in similar view: Bellingham was gushing in his praise.

And he’s a fool.

Bermuda has a serious financial crisis and is in debt.

And like all tax havens it survives on the basis of deceit and illicit financial flows.

Is that what he really wants to promote?

Actually apparently so:

Mr Bellingham added that the level of financial regulation in Bermuda “we think strikes the right balance between transparency, compliance with international norms and also provides a very competitive environment for business”.

The man is going out of his way to promote anticompetitive practices, market distortions, mistrust, tax avoidance and evasion, poor governance and the next breakdown of capitalism.

At least he is honest about it.

And in the meantime North King’s Lynn within his constituency is one of the poorest areas of the UK. And he does nothing for it.

Worse, the reforms he’s supporting will make life there very much worse.

Sickening.

That Google story is spreading

Bermuda, Secrecy jurisdictions, Tax Havens 21 Responses »

Dec 232009

The Bermuda press has picked up the Google tax story – confirming in the process that Google has five companies there.

But they also refer to the Sunday Times story on this –which I had nothing to do with, and which did include errors. I’ll distance myself from those.

Goodbye to the British OFC?

Bermuda, Cayman, Guernsey, Isle of Man, Jersey, Secrecy jurisdictions, Tax Havens 8 Responses »

May 052009

The Bermuda Royal Gazette (where else could have such a paper?) reports:

Offshore financial centres (OFCs) are facing a "Doomsday scenario" as the world’s major economic powers try to put them out of business.

That is the view of consultant Rodney Gallagher, who was a leading adviser to the UK Government on Caribbean financial affairs for more than a decade.

Speaking at the OffshoreAlert Financial Due Diligence annual conference in Miami this week, Mr. Gallagher predicted a particularly bleak future for OFCs that are British Overseas Territories, including Bermuda.

Sitting on a panel discussing the future of OFCs, Mr. Gallagher said such jurisdictions were facing a "perfect storm", due to the severe financial crisis, large countries seeking ways to find badly needed extra revenue after the crash of credit markets and the clampdown on tax havens.

"These three things represent almost a catastrophe for offshore financial centres," Mr. Gallagher told delegates.

He added:

"I am in no doubt that the next five years will see dramatic change and a considerable reduction in the volume of business being done," Mr. Gallagher said.

"Some in the private sector have seen the impact of this already during the first quarter."

I am sure that is true.

It’s the second year in a row that this sort of scenario has been presented at this conference. I was there last year. Things have got worse for them since then. The direction of travel predicted then is happening. I think there is real substance in this.

I’ve long said that for Jersey and Guernsey going bust is the most likely scenario. It’s clear the same is likely in the Turks & Caicos, Bahamas, Bermuda and maybe Cayman. It would happen inn the Isle of Man but for its massive UK government subsidy.

The writing is on the wall. I hope Michael Foot realises.

Dutch bluff

Bermuda, Netherlands, Tax Havens, USA Comments Off

May 052009

The US publication The Hill has reported:

The White House on Monday angered the Dutch Embassy by lumping the Netherlands in with a group of "low-tax countries" some corporations use to avoid paying U.S. taxes.

Ambassador Renee Jones-Bos reached out to both the White House and the Treasury Department to express her displeasure with a fact sheet released by the administration that said "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 fact sheet was released in connection with the administration’s announcement Monday of policies intended to close tax havens.
"We were greatly surprised to see The Netherlands appear in this paper, because we are working together with the U.S. – also in a G20 framework – in dealing with countries that have bank secrecy or are non-transparent," spokesman Floris van H??vell. "The Netherlands shares tax-related information with the U.S. without reservation."

This is absolute nonsense. The Netherlands is a tax haven. There are two reasons. First, whilst it is not a secrecy jurisdiction i.e. a place that intentionally creates regulation for the primary benefit and use of those not resident in their geographical domain that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, creates a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so, it is does undoubtedly fulfil the first part of this criteria. It is brazenly seeking to artificially reallocate profits to its domain. In the process it is seeking to subvert tax compliance. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.

So it may be cooperating against secrecy jurisdictions. That does not matter. It is still a tax pariah, like Ireland and Bermuda, and is rightly identified as such by the USA.

The moral is this: there’s always more than one way to abuse. The Dutch had better take notice.

When 0.43% is 66% of legitimacy

Bermuda, G20, Secrecy jurisdictions, Tax Havens 6 Responses »

Apr 172009

Dow Jones has reported:

The Organization for Economic Cooperation and Development said Friday Bermuda has signed new tax information exchange agreements with eight national tax jurisdictions.

The move comes as pressure mounts on tax havens to increase their transparency and clamp down on tax evasion at a time when the finances of many countries around the world are under strain due to the financial crisis.

Bermuda has signed agreements with Denmark, Sweden, Finland, Greenland, Iceland, Norway, the Faroe Islands, which is a self-governing region of Denmark, and New Zealand, the OECD said in a release.

Now let’s consider the population of these states (in millions, deatil added for Faroes and Greenland as they’re so small):

Denmark	5.5
Sweden	9.1
Finland	5.3
Norway	4.7
Greenland	0.1	57,600
Iceland	0.3
Faroes	0	48,856
New Zealand	4.2
Total	29.2

World	6,790

Proportion	0.43%

Source: CIA Factbook

So, by signing agreements with governments representing 0.43% of the world’s population Bermuda gets 66% of the way to international acceptability on tax.

Which shows just how badly wrong the OECD got its tax haven listing.

Update:

By 4pm (2 hours after writing the above) Reusters had this out:

“By signing agreements with governments representing 0.43 percent of the world’s population, Bermuda gets 66 percent of the way to international acceptability on tax,” Richard Murphy, a chartered accountant and a campaigner against tax evasion, said on his Tax Research blog. “Which shows just how badly wrong the OECD got its tax haven listing.”

As they say – Greenland is a very popular place right now.

A fox in charge of the chicken coop

Bermuda, Economics, Ethics, Regulation, Secrecy jurisdictions, Tax Havens 2 Responses »

Mar 232009

I had a bit of a Sunday Times weekend. I was in twice, once for the new TJN report “Where on earth are you?” , the second a comment on a story about Paul (Lord) Myners, appointed a minister last autumn to tidy up the City.

The Sunday Times alleges that:

THE government minister in charge of stamping out corporate tax avoidance has himself set up a business in the tax haven of Bermuda. Lord Myners, already under fire for approving Sir Fred Goodwin’s massive pension from Royal Bank of Scotland (RBS), was part-time chairman of an offshore company which avoided more than £100m a year in taxes.

Details of Myners’s involvement in Aspen Insurance Holdings (AIH) have emerged as Gordon Brown seeks to win the backing of heads of government to prise open tax havens at a meeting of the G20 in London on April 2.

They suggest his company saved more than £100 million in tax – and before those from Bermuda protest I’d add I did not offer the tax advice on this article – that came from a Big 6 firm of accountants.

My concern was different. I remain very worried that the likes of Myners, Turner and those running the bank bailout are all from the old mind set of finance – and that their aim is to, as I out it, pout Humpty Dumpty back on the wall again.

I will be honest: I do not think that either possible or desirable and as such I am not confident that these are the right people to be running the reform programme. New thinking is needed. I’m not convinced they can provide it. It doesn’t mean I share all the Sunday Time views on this issue – I don’t – but I do think real change is needed.

The Isle of Man – laundering Antiguan politician’s money?

Banking, Barclays, Bermuda, Isle of Man, Tax Havens 6 Responses »

Mar 112009

The Guardian has reported:

The government of Antigua has begun criminal inquiries into large payments discovered in Isle of Man bank accounts controlled by Antiguan politicians.

Disclosure of these Caribbean corruption inquiries comes at an unwelcome time for the Isle of Man, described by the chancellor, Alastair Darling, as "a tax haven sitting in the Irish Sea". The island is under review by the UK government, which subsidises its low-tax regime.

According to documents seen by the Guardian, HSBC bank, in the Isle of Man, accepted $3.2m (£2.3m) on behalf of Asot Michael, once chief of staff to the former Antigua prime minister Lester Bird.

The Bank of Bermuda refused to handle a similar account and filed a "suspicious activity report" before the further account was opened on the Isle of Man, according to investigators’ reports

Another $1.4m in total was paid into HSBC Manx accounts belonging to a former Antiguan high commissioner in London, Sir Ronald Sanders.

All deny the allegations, I should add, including HSBC.

But the money was there. And why was it there? It does not look good for the Isle of Man which, of course, issues regular protestations on its financial cleanliness.

It would, of course be much easier to find if only the Isle of man stopped acting as a tax haven and required that financial and legal data concerning all entities incorporated there was put on public record for all to see. It refuses to do so – making it a secrecy jurisdiction.

As the Guardian also notes:

Banks are facilitating international corruption by doing business with the world’s dictators, according to a report today by an anti-corruption campaign group. Global Witness calls for banks to work harder to turn away business from individuals who pose a corruption risk. It also demands an end to tax haven "secrecy jurisdictions", saying: "The most important change is to ensure that every country produces full public online registers of the ultimate beneficial ownership of all companies and trusts."

Banks named in the report include Barclays, who the campaign group says kept open an account for the son of the dictator of Equatorial Guinea, despite evidence of looting of oil revenues. Barclays declined to comment because of client confidentiality. Other banks "hid behind bank secrecy laws" to frustrate US inquiries, the report says.

Banks are also alleged to have facilitated the activities of Liberian warlord Charles Taylor, now on trial at The Hague for war crimes. A German bank is alleged to have assisted the late president of Turkmenistan to keep gas revenues under his personal control.

Dozens of other international banks are accused of providing oil-backed loans to the state oil company of Angola, which has been accused of corruption and secret arms deals.

Gavin Hayman, campaigns director of Global Witness, said: "The same lax regulation that created the credit crunch has let some of the world’s biggest banks facilitate the looting of natural resource wealth from poor countries.

"Government must take responsibility to stop banks doing business with corrupt dictators and their families."

I agree with Gavin.

I’ll link to that report as soon as I can.

Mid-Ocean News – a new one for me

Bermuda, Tax Havens 7 Responses »

Mar 032009

Mid-Ocean News in Bermuda has published the following, rather long article, quoting me:

ONE of the UK’s foremost tax experts has sounded the alarm bells for Bermuda, predicting the island will be "one of the big losers" as the US and Europe join forces to shut down tax havens.

The head of advisory body Tax Research UK, Richard Murphy, told the Mid-Ocean News this week that Bermuda "cannot overcome" the international crackdown on corporate tax abuse – and that the US and Europe would not see the island’s regulatory environment as any consolation as it seeks to close us down.

"You may say you’re well regulated, but so was Lehman Brothers," he said, referring to the bankrupt investment bank. "Bermuda is a cost to the US and Europe; you can’t do anything about it. You’ve won by leveraging the financial situation. You will be one of the big losers."

Mr. Murphy also hit out at those who seek to reassure the public via the media that Bermuda will emerge unscathed from the current crackdown on tax havens, labelling them "horribly na?Øve".

The long-time consultant, who has addressed both the United Nations and European Union on tax issues, believes greater transparency could provide a stay of execution, but added: "There is not much chance of Bermuda regulating its way out of this problem."

Mr. Murphy’s comments come following a meeting of eight European heads of state in Berlin last weekend, which resulted in a joint pledge to "put a stop to tax havens", in the words of French President Nicolas Sarkozy.

"The world financial system is hurting – the US, UK, France, Germany – they’re all hurting," Mr. Murphy said. "Because of that, they’ll pick on people imposing that hurt on them. Bermuda is one of them. A small jurisdiction like Bermuda almost always creates regulations designed to undermine the regulations of another state.

"Bermuda does have very favourable trust laws falling into that area. By no means is it the most dangerous, pernicious state, although I’ve seen some things in my time that are rather strange. But Bermuda is willing to undermine the way regulation works in London and New York, and you are going to see a reaction.

"The regulations were asking the wrong questions and seeking the wrong results.

"Now it’s a massive pile of paperwork of no consequence.

"We’re looking at a world that is saying: ‘We don’t care, you’re costing us money’."

He believes impending anti-tax-haven legislation in the US and renewed scrutiny from the UK will prove the nail in the coffin for Bermuda’s (re)insurance sector, which has already seen flagship company ACE Ltd redomicile to Switzerland.

"I’ve just been in Washington, D.C., and the people looking at this in the US do list Bermuda as a problem, undoubtedly," he said. "They noticed where people went in 2002 and 2003 when corporate inversions were the trend. These companies don’t just go anywhere in the world – they go to Bermuda. When we have London insurance brokers relocating to Bermuda and getting tax relief from the UK, then we think Bermuda qualifies as a secrecy jurisdiction. Bermuda needs to think: ‘We’re in the firing line’. You cannot offer that sort of environment and expect nothing to happen to you. It’s not going to be tolerated. People are angry.

"Domestic politicians will react, or they will hear about it at the ballot box.

"Every now and then I see in your press, which I monitor, people saying, ‘Don’t worry, Bermuda will be OK’. This is horribly na?Øve."

He also warned Bermudians that, without a (re)insurance industry, the island might have to rely on tourism to survive – meaning adapting to lower salaries and a less comfortable lifestyle.

"Bermuda will look very different; chefs in the hotel industry don’t make what traders in the financial services industry do," he said. "The tourism industry is no financial services industry."

Mr. Murphy sees the upcoming G20 summit in April – a meeting of finance ministers and central bank governors from the 20 most influential economies – as a turning point, when British Prime Minister Gordon Brown is likely to announce the next step in the fight against tax haven abuse.

"Gordon Brown was a great defender of tax havens, second only to his friend George Bush," said Mr. Murphy. "Now his friend is gone, he has changed his tune. There will be an announcement at G20 on enhanced regulations, whether it’s a task force, a working party, or new regulations on an internationally coordinated basis.

"Why would politicians willingly stand back and watch their tax revenue disappear? There’s going to be a move against corporate inversions and relocations. Bermuda cannot overcome that problem – you’re too small."

He believes Bermuda’s only chance of staving off a mass exodus as the Stop Tax Haven Abuse Act gathers momentum is to cooperate with international transparency efforts. "You can become more transparent," he said. "You can have an automatic information exchange. You can take up membership in the EU Savings Tax Directive, which you are not a member of currently. Cooperation will preserve some offshore activity – but the insurance companies will be on their way."

The Premier, the Finance Minister and one of Bermuda’s top lobbyists have all spoken out recently on the threat to Bermuda from overseas, in particular from US President Barack Obama, who has long indicated that closing ‘tax loopholes’ is near the top of his priority list.

Dr. Ewart Brown told an audience at the Sandys Rotary Club earlier this month that he believes most businesses, including troubled insurer XL, will stay on the island. Finance Minister Paula Cox told the Mid-Ocean News this month that as a jurisdiction "we can and do differentiate ourselves from the herd". Association of Bermuda Insurers and Reinsurers president Bradley Kading told the Mid-Ocean News in January that Bermuda "is not a tax secrecy jurisdiction", adding: "there is complete transparency."