Finance minister Bob Richards warned yesterday that an international crackdown on offshore jurisdictions could wreck the economies of the developed world.

The stark warning came in the Budget speech as Mr Richards said that an attempt spearheaded by the Organisation for Economic Development and Co-operation to increase its tax revenues by clawing back offshore money could backfire.

He told the House of Assembly: “The irony of all this is that if the OECD eventually gets what it wants, the consequences will likely be catastrophic to the very same economies they represent. If these trillions of dollars of allegedly unpaid taxes are actually collected, multinationals — the very engines that create all these jobs and wealth across the globe — will be severely damaged.

“Corporate earnings will plunge, stock prices will collapse, unemployment will soar and pension funds that depend on those stock prices will become impaired.”

And he predicted, if companies are forced out of legal schemes to avoid tax, the world would face a global recession that would dwarf the crash of 2008. Mr Richards said: “Bermuda will be sucked down that vortex. This is a classic case of having to be careful what you wish for.”

He added that Bermuda continued to remain in the sights of leading OECD nations, with an increasingly hostile regulatory and tax environment. And he said: “High-tax European nations, seeking even higher tax revenues, have targeted multinational corporations doing business in their respective countries.

“This initiative has been spearheaded by the OECD.

“Their principal targets are large US multinationals that have historically used the international network of double taxation treaties to minimise their overall tax burden.”

Mr Richards explained that the OECD had launched the base erosion profit-shifting drive to implement a new arrangement tied to transfer pricing practice through country-by-country reporting.

He said the new model would require multinational businesses to report to every country it does business in to show how much business it has in that and other countries.

But he added: “Many Bermudian companies, including those not US-based, will be caught in this country-by-country reporting protocol along with its administrative burden.

“The Bermuda Government is still studying how much administrative burden this proposal will have on us.

“We are also consulting with the affected Bermuda companies and watching the strategic moves our number one client country the US will make in this area.”

Mr Richards said that, as Bermuda was host to many US multinationals, it was “often caught in the crossfire of anti-tax haven rhetoric”.

He added: “This rhetoric is often biased and ill-informed about Bermuda, causing us unwarranted reputational harm.”

Mr Richards said this was combated with information sessions for key opinion formers to dispel “sensational, stereotypical nonsense” about the island.

He added: “When we point out Bermuda’s proven expertise, capacity and track record to insure, protect and pay claims to customers against catastrophic events around the world, thereby enabling further economic growth, it causes even our most zealous critics to pause.”

Mr Richards added that some of the loudest criticism came from countries which themselves operate as tax havens.

He said: “Delaware and Nevada rank among the world’s biggest tax havens, right up there with the City of London.

“So the international debate about tax havens is not only about transparency, co-operation and information sharing, it is also about competition — hypocritical competition.”

And he ruled out the introduction of a low rate of corporate income tax to blunt attacks on the island’s tax system, as Ireland, which levies a low rate, was also under attack, while the insurance and reinsurance industry was known for large profit swings, which would lead to wide variations in government revenue, which revenue planning would “not be able to tolerate”.

Mr Richards added: “Last but not least, the Bermuda Government has given a legally binding undertaking not to introduce such a tax.”