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Cannonier: We support multilateral tax convention in principle

Bermuda supports an international agreement aimed at tackling tax evasion “in principle”, Premier Craig Cannonier said yesterday.

“Bermuda welcomes the initiative to conclude a Multilateral Convention Agreement in principle and supports the principles of transparency and exchange of information that the Convention embodies,” the Premier said in a statement.

“However, legitimate reservations exist that must be addressed relating to costs, security of data, treaty duplication prior to signing the document. Bermuda is currently in talks with HM Treasury, in full anticipation that the issues will be ironed out as quickly as possible.”

Mr Cannonier was commenting after speaking to international media this week on Bermuda’s strategy relating to international tax and regulatory policy.

The headline in the Guardian yesterday said: “Bermuda refuses to sign up to Cameron's tax evasion deal” and “David Cameron's G8 agenda to close down cross-border tax evasion dealt blow by Bermuda prime minister Craig Cannonier”.

Mr Cannonier said in his statement yesterday: “Bermuda has always been a reputable and internationally responsible jurisdiction. Our main industry is Reinsurance and Insurance and our consumption tax regime dates back to the 1800s, a century before Bermuda became an international financial centre.

“For example, 60% to 65% of all our financial activity in Bermuda is in insurance assets covering risks with trading partners, such as in the UK, where Bermuda has a direct and significant role in its economy, producing as many as 100,000 jobs. Bermuda also writes 27% of all European reinsurance, including 40% of all Lloyds Reinsurance.”

Premier Cannonier continued: “Originally Bermuda focused its Tax Treaty strategy around members of the G8, G20, EU, and OECD countries and as a result Bermuda has signed 39 Tax Information Exchange Agreements.

“To date, Bermuda has signed Tax Agreements with 90% of the G20, with the exception of two countries (the Kingdom of Saudi Arabia and the Russian Federation). Bermuda has tax agreements with 52% of EU member states but we have concluded negotiations with many more EU members. Bermuda also has tax agreements with 76% of OECD member states.

“We look forward to our discussions with Prime Minister Cameron on these matters.”

Earlier Reuters reported the Premier said in an interview that Bermuda and Britain's other overseas territories will not sign up to an international convention aimed at tackling tax evasion ahead of the G8 summit in Northern Ireland next week.

But Bermuda could tighten rules so that Bermuda-registered subsidiaries needed to have more economic substance on the Island to enjoy its tax benefits, he told Reuters in the interview yesterday.

And the Guardian newspaper reported Mr Cannonier said the territories were ready to agree that wider sharing of information with international tax authorities was required in principle, but that Mr Cameron's aim of having them all commit to signing the convention at the weekend was unlikely to be achieved.

A spokesman for the Cayman Islands government said it had agreed on Friday to commit to an intention to sign the convention. No 10 said it expected most of the overseas territories and crown dependencies will sign up. But the group Cayman Finance said the devil was in the detail and that they “are not prepared to build a tax authority or a collection agency or incur huge costs to collect other people’s taxes”.

Premier Cannonier told Reuters the Prime Minister’s aim of having the territories all commit to signing the convention at the weekend was unlikely.

"My understanding is that we are not here to sign something, but simply to agree that everyone needs to get on par," he told Reuters in the telephone interview.

British Prime Minister David Cameron has invited the mainly Caribbean territories to London ahead of hosting the annual gathering of the G8 group of leading economies, at which he has put tax avoidance and evasion high on the agenda.

Though they share Britain's monarch as head of state, the UK government's writ doesn't run in the self-governing territories, so Cameron must rely on persuasion to secure an agreement.

A deal could give Cameron a coup against tax campaigners who question Britain's commitment to the issue, given the prominent role played by UK territories in facilitating tax evasion, avoidance and the hiding of stolen assets, Reuters reported.

Mr Cannonier said the territories had held conference calls ahead of their meeting with UK ministers in London this week and none had expressed a willingness to commit to signing the convention when they gather with Cameron at Downing Street on Saturday.

Mr Cannonier said Bermuda already met most of the standards in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, including having a register of beneficial owners of companies that other tax authorities can check.

However, he said the convention, drafted by the Organisation for Economic Co-operation and Development, a body of mainly rich nations, had potentially damaging elements for Bermuda.

"There's some clauses in there that we need to look at, that may need to be adjusted, and ... our Finance Ministry is going over it with a fine-tooth comb," he said.

In May, the territories, which also include the Cayman Islands, the British Virgin Islands and the Turks and Caicos Islands, agreed to share taxpayer information with the UK, France, Germany, Italy and Spain, but the convention will include many more countries and more information.

“Bermuda has been accused of facilitating tax avoidance by large companies,” the Reuters report said.

“Multinationals typically park intellectual property (IP) in letter-box companies on the island. These then charge fat fees for the use of the IP to affiliates in countries where the groups have big sales, thereby channelling profits to the island, which charges no corporate income taxes. Premier Cannonier said it was unfair to blame Bermuda for this since it was ‘only one link in the chain’ but added the country could tighten rules so that Bermuda-registered subsidiaries needed to have more economic substance on the Island to enjoy its tax benefits.”

Premier Craig Cannonier: Bermuda could tighten rules so that Bermuda-registered subsidiaries needed to have more economic substance on the Island to enjoy its tax benefits, he reportedly told Reuters in an interview yesterday.

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Published June 13, 2013 at 9:00 am (Updated June 12, 2013 at 8:39 pm)

Cannonier: We support multilateral tax convention in principle

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