Bank chief opines on global tax initiative
Butterfield bank remained upbeat when discussing with investors the proposed global corporate tax plan and how it could affect bank operations.
Chairman and chief executive officer Michael Collins also provided an update Tuesday on the bank’s cost cutting efforts of consolidating a workforce in Canada.
His discussion came during a quarterly call Tuesday with investors after the bank’s release of its second quarter earnings report Monday.
The bank chief was probed about the global corporate tax initiative after more than 130 countries – including Bermuda – signed an agreement that consists of a two pillar plan to reform international tax rules.
Mr. Collins said, “Under Pillar One, taxing rights of more than $100 billion of profit are expected to be reallocated to market jurisdictions each year, excluding regulated financial services and extractive industries, such as mining, oil and gas.
“Under Pillar two, there is a proposed global corporate income tax with a minimum rate of 15%.
“After much speculation, it is helpful to now understand the initial framework which has an ambitious timeline for implementation, with an expected effective date in 2023, and with significant further work and negotiation to come.
“All of Butterfield’s key operating jurisdictions have joined the agreement and are actively participating in discussions, highlighting their important role in global capital flows for insurance and reinsurance, as well as the international hedge fund industry.
“All of our locations are blue-chip financial centres with track records of transparency and adapting to new regulatory requirements.”
Later when asked again by another investor about the possible impact, he conceded, “Pillar two, in terms of the 15% minimum tax may have some impact, but we are hoping that the tax differential between offshore and onshore will be good enough to keep companies here.”
On another matter, the bank continues to shift functions across borders, as they seek functional efficiencies. They moved some operational banking activities from their Mauritius office to Guernsey, while leaving other operations there dealing with trust financial statements.
“And we’re still working in Halifax,” he said. “We have a good team up there of about 150 people and we’ve added 37 new positions this year, which will save us about $1.5 million, compared to having those positions in more expensive jurisdictions.
“And obviously, we reduce headcount in Bermuda, Cayman and the Channel islands as we build out Halifax. That will help, but it is gradual and will take some time.
“There is excess office space in Halifax, but we are growing (the team) gradually, making sure (changes) work before we add accounts from Bermuda and Cayman.
“We have the majority of our compliance and aml (anti-money laundering) and alert monitoring people up there. That’s good.
“I would say the experience in Halifax has been fantastic. It’s a great workforce. All young, coming out of university, thrilled to be working for Butterfield.
“It’s become a little more difficult because it’s a hot market. Post pandemic a lot of Canadian companies have moved operational processing centres there, so there is a bit of competition and wage pressure for these students coming out of university, but we will continue to grow it and I think we will get above 200 (office staff) at some point. But it is going to take some time.”