Oxfam ranks Bermuda world’s worst tax haven
Oxfam’s top 15 tax havens:
2, Cayman Islands
9, Hong Kong
15, British Virgin Islands
Bermuda is “the world’s worst corporate tax haven”, according to a report due to be released today by Oxfam.
The global charity found that US multinational companies reported $80 billion in profits in Bermuda in 2012 — more than their profits reported in Japan, China, Germany and France combined.
The report met with a sharp rebuttal from Ross Webber, the chief executive officer of Bermuda Business Development Agency, who said Oxfam’s assertions were based on “flawed economics and a lack of understanding”.
Oxfam’s report, entitled “Tax Battles: the dangerous race to the bottom on corporate tax”, defines a “tax haven” as a low-tax or no-tax nation with generous tax incentives, according to reports today in the Australian media.
Oxfam criticises the Organisation for Economic Co-operation and Development for not defining low-tax countries as tax havens.
Setting a low tax rate is not illegal, but the world’s biggest economies want to clamp down on tax avoidance by multinational companies channelling profits to low-tax jurisdictions.
The OECD’s Base Erosion and Profit Shifting plan aims to force multinationals to pay more tax where their profits are made, rather than in other places where tax rates are lower.
Oxfam argues that tax revenues avoided through tax havens harm poor countries and their inhabitants — the people the charity aims to help.
The charity defends its definition of a tax haven in the report. “Criteria for the European Union blacklist, may not, for example, include whether a country has a zero per cent corporate tax rate,” Oxfam states.
“This means countries such as Bermuda, the world’s worst corporate tax haven according to Oxfam’s analysis, may not feature on the list at all.”
Oxfam added: “The EU’s decision to only assess and list countries outside of the EU ensures that no European country will feature on their blacklist, despite Oxfam’s analysis indicating that the Netherlands, Luxembourg, Ireland and Cyprus are among the world’s worst corporate tax havens.
“It is absolutely critical that the world establishes a clear list of which are the worst tax havens, based on objective criteria, and free from political interference.”
Mr Webber said Oxfam had got it wrong. “Unfortunately, many of the Oxfam assertions are based on flawed economics and lack of understanding,” he said.
“We consider it an inaccurate, ill-informed and disturbingly prejudiced attack on a small north-Atlantic archipelago that exerts an enormously positive impact globally — including on the very regions and populations Oxfam wrongly accuses us of threatening.”
He added that Bermuda’s economic model was different to any other international financial centre.
“We support close to a half-million jobs globally, creating employment not only on the island itself, but also in onshore trading partners,” Mr Webber said.
“That amounts to an estimated 300,000 jobs in the US and more than 70,000 in the UK through trade, foreign direct investment, and portfolio investment capacity. In this way, our 21-square-mile country facilitates critical economic globalisation.”
Oxfam’s labelling of Bermuda as a tax haven contradicts the OECD’s, which states that four criteria must be met for a jurisdiction to qualify as a tax haven: a lack of transparency, a lack of information exchange, no substantial activity and no or nominal tax on income.
Mr Webber said Bermuda has real business conducted by physical companies on the island, is transparent and compliant, and exchanges information via Tax Information Exchange Agreements (TIEAs) and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Bermuda also levies a 15.5 per cent income tax on payroll.
The BDA added that the island’s global reinsurance market is also vital to other countries’ economic health and survival. “Bermuda is home to companies that provide 35 per cent of capacity for Lloyd’s of London, and through payment of insurance claims, they are responsible for the rebuilding of cities, coastlines and communities around the world after the worst disasters,” the BDA stated.
The organisation cited the African Risk Capacity initiative, created in Bermuda to help African states become more resilient and recover faster from natural disasters, as an example of how the island is helping the world’s vulnerable.
It added that Blue Marble Microinsurance, which involves a consortium of eight insurance companies with operations in Bermuda, had joint ventures designed to close the protection gap in the developing world, including its first venture in Zimbabwe.
Mr Webber added: “Oxfam’s assertions may make great headlines, but they just don’t reflect economic reality.
“Cross-border trade via multinational enterprises is the fuel that keeps global financial systems running smoothly.”
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