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."
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I see you are censoring or removing comments [MY COMMENTS and everybody else’s] that are contrary to your opinion, particularly in this article. I asked you do some research on Bermuda. So based on you uninformed and inaction, I post this for you.
BANKING SYSTEM OF BERMUDA
Bermuda is not an offshore international banking center. International banks, which operate in other offshore locations and also in most onshore jurisdictions, are not allowed to register as banks and may not operate as banks in Bermuda for the general population.
There are now four banks, all local or mostly so with assets that in aggregate exceed US$500 billion. All registered banks in Bermuda must by law be at least 60% beneficially owned by Bermudians. The actual figure was closer to 85% until early in 2004. There is an understanding from the Bermuda Government that their Head Offices will remain in Bermuda, their staff in Bermuda will be majority Bermudian and their mind, management and control will be Bermudian.
These banks not only handle the day-to-day banking needs of the island’s business community but also are active in international corporate operations. Although foreign banks may not operate in Bermuda, exempted companies may deal with any bank in the world in any currency, because no exchange restrictions are imposed on them.
The services that the Bermuda banks offer include investment management, opportunities to invest in Bermuda-based mutual funds, letter of credit facilities, and links with all major financial centers around the world. The banks have achieved the same status as other international banking institutions through their handling of large funds on behalf of the island’s exempted companies. Bermuda’s four banks operate a joint clearing system.
The Bermuda Government benefits substantially from licensing and regulation, via the Bermuda Monetary Authority, of Bermuda’s banks. There is no central bank in Bermuda. Instead, the Bermuda Monetary Authority is the regulatory authority and the relevant pieces of legislation are The Banks & Deposit Companies Act 1999 and The Banking Appeal Tribunal Regulations 2001. The Bermuda Monetary Authority is responsible for the licensing and regulation of insurance companies, banks, deposit companies and investment businesses, the issue and redemption of Bermuda notes and coins, supervision of Bermuda’s financial institutions, providing advice to Government on banking and other financial and monetary matters and the vetting of individuals and entities wishing to set up corporate entities in Bermuda.
Financial Institutions Operating:
Bank of Bermuda Limited (HSBC group)
Bank of N. T. Butterfield & Son Limited
Bermuda Commercial Bank Ltd
Capital G Bank Limited.
Sirron
I’m not censoring you
Your comments are being posted
I do have more important people to deal with than you
People who might be persuaded, which I doubt you will be
But you might look at this -http://www.taxresearch.org.uk/Blog/2009/03/10/the-elephant-test/
It was written with you (and others) in mind
Note, and take action, I suggest
Richard
http://www.globalreinsurance.com/story.asp?sectioncode=5&storycode=377246&c=2
Bermuda safe from new anti-tax haven law, says ABIR
5 March, 2009
Bermuda not affected by Stop Tax Haven Enforcement Act, says The Association of Bermuda Insurers & Reinsurers
Insurance and reinsurance companies based in Bermuda would not be affected by new laws against offshore, said Bradley Kading of The Association of Bermuda Insurers & Reinsurers.
“There may be some Bermuda corporations affected by the bill,” said Kading. “We don’t believe it affects the global insurance and reinsurance companies based in Bermuda.”
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The Levin bill (Stop Tax Haven Enforcement Act), which has received the support of the Obama adminsitration, is “focused on US multinational corporations and US citizens,” he said. “It is focused secrecy and financial reporting concerns.”
There is not common definition of “tax haven” Kading said, and he listed four criteria that are often seen:
1) is there an income tax, or a low rate of taxation?
2) is there secrecy with regard to financial information of banks and other financial institutions?
3) is there a lack of cooperation with other countries with regard to tax law, money laundering or other enforcement matters?
4) is there an actual economic substance to the companies operations located in the country?
“Bermuda does not meet three of these four tests,” Kading said. “Bermuda is not a bank secrecy jurisdiction. We have tax information exchange agreements with the US, UK and with other countries. Bermuda willingly enters into such agreements. Bermuda recently signed an additional law enforcement cooperation agreement with the US. Bermuda is cited by the US Treasury and the OECD as a cooperative jurisdiction with regard to tax law enforcement. Our members in Bermuda perform substantive underwriting in Bermuda and most have their headquarters staff in Bermuda.”
Bermuda’s government has never had an income tax. The government has two primary sources of revenue: tariffs on all imports (the island requires large amounts of imports) and a payroll tax largely paid by companies on behalf of their employees.
Sirron
You say that
But then you say you’re not a tax haven
And you quote a definition of a tax haven 11 years out of date
The STHAA does define you as a tax haven
That means it doesn’t really matter what you say
It’s what others say that matters now
You really do need to smell the coffee
Richard
Writing his Offshore Asset Protection blog, Robert Bauman, editor of The Sovereign Society Offshore A-Letter, said that chairman of the Senate Finance Committee, Senator Max Baucus (Democrat, Montana) had all but rejected Senator Carl Levin’s radical anti-tax haven legislation.
Finance Committee staff have circulated draft legislation on behalf of Sen. Baucus that focuses on increased reporting requirements to help the US Internal Revenue Service (IRS) discover illegal tax avoidance schemes, domestic or offshore, and strengthens some IRS enforcement tools.
Earlier this month, Sen. Levin introduced a beefed-up version the Stop Tax Haven Abuse Act, a bill which he originally co-sponsored with Barack Obama last year before he became President. Bermuda was on the list of “secretive jurisdictions” targeted by the Act.
According to a statement from one of the Finance Committee aides, Mr. Bauman, who served with Sen. Baucus in the House during the 1970s, claimed that his former colleague favours a more targeted approach that would give the IRS more power to detect individual American tax cheats, rather than condemning all offshore financial centres.
“Baucus’ move means he is staking out a dramatically different approach on legislation on alleged offshore tax avoidance, compared to that of Senator Levin,” he said.
“And Baucus definitely has the senatorial upper hand as Finance chairman, the Committee that has jurisdiction over the Levin bill and all tax issues. Levin is not a Finance Committee member.”
Mr. Bauman said Sen. Baucus’s staff draft would require US banks transferring more than $10,000 to offshore accounts to report the amount and destination to the IRS and would increase penalties on certain infractions related to offshore accounts, including failure to file a return for a foreign trust and the draft would lengthen the IRS statute of limitations for certain international tax returns from three to six years.
In contrast, he said that Sen. Levin’s legislation would allow the US Treasury to control, and even ban, offshore private capital flows and investments by Americans, but that it came at a time when the US government “desperately needs foreign capital and offshore investors to finance Obama’s trillion-dollar deficits”.
“But Sen. Levin insists he will make this bill a legislative priority this year,” he said. “Among other enormities, the bill creates an unprecedented ‘blacklist’ of 34 offshore jurisdictions (Switzerland included) that would be presumed to be ‘tax evasion’ sites. This presumption is based mainly on the fact these jurisdictions have high degrees of financial secrecy guaranteed by law.”
Mr. Bauman said that Sen. Baucus’ approach was consistent with more reasonable past IRS practice in which individual, named taxpayers are audited or investigated and proceeded against on a case-by-case basis, but that Levin’s “ham-handed bill” would condemn all users of tax havens and the havens themselves, creating a radical presumption that any American engaging in offshore financial activity is a tax cheat.
The Finance Committee plans a hearing on the Baucus draft legislation on Tuesday, March 17.
Sirron
I knew there had to be a person on earth who took Bob Bauman seriously
Now I know – it’s you!
Have you told him? He’ll be really grateful.
Richard
PS Have you noted which one Obama supports?
BTW some inaccuracy with the Mid Ocean article.
ACE was NEVER a Bermuda Company. Ace was previously domiciled in the Cayman, i.e. they moved from Cayman to Switzerland They only have their executive offices here, which remain.
SN