Think tank: US tax threat growing for Island insurers
The chances of a tax being imposed on re/insurers due to the US government needing to raise much-needed revenue in order to tackle a spiralling debt issue are greater than they have been at any time over the past two to three years.
That is the view of Eli Lehrer, vice-president of US think tank The Heartland Institute, who was meeting with donor organisations in Bermuda this week.
In an interview with
The Royal Gazette, Mr Lehrer said that there were a number of other bits of legislation in the offing which could potentially impact the industry including the earthquake insurance bill which is set to be proposed in the House of Representatives and a sweeping flood insurance reform which is due to be passed.
“The chances (of a tax threat) have definitely gone up because nobody has done anything on revenue,” he said.
Mr Lehrer said that Representative Richard Neal (Democrat, Massachusetts) was still intent on pushing his bill through which would increase taxes on reinsurance premiums ceded by US subsidiaries to their non-US parent companies and while he had found no Republican to sign up to it, he believed that the Republicans would have to approve some tax measure next year. If it did come to the table it was likely to be in the form of US President Barack Obama’s main proposal, which would be more sweeping than what Mr Neal has currently put forward, he said.
He said that the majority of Americans still knew Bermuda primarily as a tourist destination, but there was now an increasing awareness of the role re/insurance plays among people who followed politics in the coastal states.
Citing Premier Paula Cox’s visit to Washington in June, Mr Lehrer said that interest in the Island had heightened with a bigger turnout than before and she went down well with officials in President Barack Obama’s administration, and Congressional members in the Senate and the House of Representatives.
“I thought she made a good impression and the public speech I saw was well-received,” he said.
Mr Lehrer said that as the debt ceiling had increased so had the US tax threat for Bermuda re/insurance companies and a revenue bill was inevitable at some stage, even if its was in the form of business tax reform.
But he added that there was nothing immediately on the horizon.
“Given the calender I can’t see anything happening in 2011, but in 2012 due to Congress approval ratings being incredibly low part of the reason which is that it has passed no legislation of any significance members will want something to campaign on and corporate tax reform would be it, to say that they have achieved something, and that to me poses a danger,” he said.
While the Association of Bermuda Insurers and Reinsurers and to some extent Government were doing everything in their power to fight the Island’s corner, Mr Lehrer said that they needed to continue telling the Bermuda story and point out the impact of the tax threat on the US consumer.