UK would do well to observe Bermuda’s successes - Foreign Office Under Secretary
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 Gazette that 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.
Mr Bellingham’s comments indicate that relations between Bermuda and Britain have improved since the Conservative-Liberal Democrat coalition government took over from the previous Labour administration 11 months ago.
Two years ago, former British Prime Minister Gordon Brown promised at the G-20 summit in London that clampdowns on offshore financial centres would be the “beginning of the end for tax havens”.
“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.”
Several insurance companies have redomiciled to Bermuda from the UK over the past few years, including Catlin Group, Hiscox and Hardy Underwriting, causing a loss in corporate tax revenues for the UK.
“The British Government is concerned about any company that moves out of our jurisdiction,” Mr Bellingham said. “That’s why the coalition government has put an emphasis on getting corporation tax down.”
Corporation tax was cut by two percent in the recent UK budget and plans were announced for further one percentage point cuts over each of the next three years, as well as measures to reduce tax on overseas earnings.
“The good news for the UK is that a number of companies have now said they’re not going to relocate offshore and some have said they will consider coming back to the UK,” Mr Bellingham said. “The UK Government is very mindful of the fact that it is businesses that create wealth through employing people, and paying national insurance and taxes.
“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 Conservative Member of Parliament for West Norfolk went on to say he regarded Bermuda’s growing public debt as manageable and did not expect the UK Government to have any need to impose the kind of borrowing restrictions that it imposed on the more heavily indebted Cayman Islands.
He said he had spoken with the Premier over lunch yesterday at the Bermuda Financial Services Conference about the Bermuda Government’s plans to pay down $210 million of debt by 2016.
“Each territory is different and in some cases we may take the view that borrowings have got to too steep a level, and in those circumstances we’re looking at a tighter fiscal framework,” Mr Bellingham said. “I don’t take the view that one size fits all. Each territory is going to have a different relationship with Britain.
“I don’t envisage any circumstances in which the UK Government would intervene with the Bermuda Government the way things stand at the moment because everything is moving in the right direction.”
Independence, said Mr Bellingham, was a matter purely for the people of Bermuda.
“Bermuda is the largest territory and the most successful economically,” he said. “So Bermuda is the jewel in the crown and we’re very proud to keep it in the UK family, if that’s what the people of Bermuda want. It’s about self-determination.
“We’re not going to do anything to encourage them to go independent, but on the other hand, they know their future is in their hands. So long as they want to remain British, we will cherish that and do all we can to work in partnership in a tough global economy.”
He described the relationship between Britain and Bermuda as “grown-up”, “not old-fashioned”, and built on trust and mutual respect.
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 very fact that Bermuda’s had so much success with the insurance sector must indicate that it’s doing quite a lot right,” he said. “I don’t in any way believe that has come about by accident. It’s come about because successive governments in Bermuda, working with the UK Government, have had a very clear focus on what is going to attract new business.”
Mr Bellingham had planned to visit the Island two months ago, but a Parliamentary vote prevented him from coming.
“Paula Cox has asked me to visit Bermuda and I have promised to my level best to come before the end of the year,” he added.
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