Govt: Obama’s tax plans unlikely to happen
A fresh attack on a mainstay of Bermuda business in US President Barack Obama’s budget proposals has been brushed aside by Government.
The presidents proposals include denial of tax deductions for reinsurance premiums paid to foreign affiliates and taxes on foreign income for US businesses — although the rate would still be lower than they pay in America.
A Government spokesman said: “The Government has been monitoring this matter for the last few years and note that the reinsurance provision is the same provision that has been included in all the Obama budgets and has never been seriously considered by Congress.
“Now with Republicans in control of Congress, it is even more unlikely to be considered by Congress.
But he added: “Despite this position the Government will continue to monitor this matter and take the required actions in order to protect our economic interest.”
President Obama’s budget also proposes a one-off 14 per cent tax on an estimated $2 trillion parked overseas in a bid to encourage major US corporations like Google and Microsoft to bring the cash home.
The Government spokesman said that both Senate and the House of Representatives were controlled by Republicans — who are less likely to agree to Democratic proposals.
The spokesman added: “As for the increase in corporate taxes overseas, it is noted that this proposal has little support from the Republicans.
“In addition, many Democrats in Congress also oppose these proposals.”
The White House move to change the tax system for reinsurance sparked a letter of protest to senior members of the US Senate finance committee signed by a string of companies with Bermuda bases and the Association of Bermuda Insurers and Reinsurers (ABIR).
The group — under the banner of the Coalition for Competitive Insurance Rates — asked the Senators to reject the presidential proposals.
The group warned that — if approved — it would limit US insurance capacity and drive up the cost of insurance.
The letter said: “In effect, this is designed to punish international insurers by imposing additional taxes on their US operations.
“It essentially imposes and isolationist tariff in international insurance companies conducting business in the US, ultimately denying them a key risk-management tool everyone else uses. They would have to either replace affiliate reinsurance with non-affiliate reinsurance with non-affiliate reinsurance or raise more capital.”
And the letter warned that the proposals could spur “retaliatory actions” by other countries and damage relationships with important US trading partners, as well as breach World Trade Organisation (WTO) commitments.
The letter added: “The European Union and individual countries like the United Kingdom, Switzerland and Germany have asserted that this tax would violate WTO commitments and tax treaties.”
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