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Burt: EU ‘substance’ legislation necessary

Telling Bermuda’s story: Premier David Burt speaks at the BDA’s business forum in London yesterday during a “fireside chat” with Lord Holmes, left (Photograph supplied)

David Burt heads to Brussels today to speak with European officials as the island puts the finishing touches to legislation to address the EU’s “economic substance” concerns.

The Premier told The Royal Gazette from London yesterday that the legislation, which will be tabled in the current parliamentary session, was necessary to protect Bermuda’s status as an international business centre.

The island is one of 41 jurisdictions that committed to bring in legislation before the end of this year to address the European Council’s Code of Conduct Group’s concern about offshore shell companies set up to avoid onshore taxes. Failure to follow through would risk the island being placed on the EU’s list of noncooperative jurisdictions.

The Europeans are pressuring low-tax jurisdictions to identify entities that lack “economic substance”, judged by criteria such as the number of employees, physical presence and revenue-generating activities, and to create a legal framework that allows for enforcement measures to be taken.

Mr Burt said: “We, as the Bermuda Government, understand what is necessary to remain a blue-chip jurisdiction — and Bermuda will remain a blue-chip jurisdiction.

“It’s important to recognise that this is not just an EU issue, it’s also an OECD [Organisation for Economic Co-operation and Development] issue, so this is becoming more of a global standard and Bermuda has always led in complying with global standards.”

The OECD has stated that its Forum on Harmful Tax Practices will eventually replace the EU’s “2.2 substance regime”.

Bermuda is one of the 154 members of the OECD Global Forum, an organisation that promotes tax transparency and information exchange, Mr Burt said. If the island wants to remain an international financial centre, it would need to continue to meet OECD standards, he added.

Bermuda had 16,307 companies on its business register as of March 31 this year. Of those, 12,886 are described as international.

While many of them do not directly employ people, their presence provides work and income for business services providers and law firms, as well as company fees for the Government coffers.

The EU is targeting “relevant economic activities” including banking, distribution and service centres, financing, fund management, headquarters, insurance, intellectual property, leasing and shipping.

Mr Burt said he had shared a paper referring to the legislation with industry leaders and had worked with business representatives as the drafting of the new framework.

The Premier said last Friday in the House of Assembly that his work in Brussels this week will include fixing the site of Bermuda’s EU Representative Office in the Belgian city.

He is also scheduled to meet with Johan Van Overtveldt, the Belgian Minister of Finance in charge of Combatting Tax Fraud, as well as EU Permanent Representatives of Lithuania, Slovenia and Romania.

Romanian engagement is viewed as key as Romania prepares to take presidency of the European Council in 2019.

Mr Burt was in London yesterday to attend the Bermuda Business Development Agency’s multi-industry forum. He appeared onstage with Lord Holmes, a British proponent of fintech.

“The conversation was about fintech and distributed ledger technologies and how they can be used for the public good,” Mr Burt said. This was highly relevant for Bermuda as the island worked on its blockchain-based e-ID project, which would form the spine of a distributed ledger infrastructure, he added.

“A lot of the focus of has been on cryptocurrencies without recognising the potential for the underlying technology to make government work better and for the public good,” Mr Burt said.

More than 200 people turned out for BDA event, which will be followed by a second event focused on fintech today.