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Leaders react after Biden labels Bermuda a tax haven

Tax reform: US President Joe Biden addresses a joint session of Congress, where he referred to Bermuda as a tax haven (Melina Mara/The Washington Post)

Business and political leaders in Bermuda have reacted to US President Joe Biden labelling the island a tax haven, and appearing to have the island in the “crosshairs” of US tax reform.

They have highlighted the support the island's international business sector gives to the US economy, and have said Bermuda needs to educate and advocate on those benefits. There has also been a call for a delegation to travel to Washington DC.

Mr Biden, in his first US Joint Session of Congress speech last night, said: “A recent study shows that 55 of the nation’s biggest corporations paid zero federal income tax last year. They made in excess of $40 billion in profit.

“A lot of companies also evade taxes through tax havens from Switzerland to Bermuda to the Cayman Islands. And they benefit from tax loopholes and deductions for offshoring jobs and shifting profits overseas. That’s not right.

“We’re going to reform corporate taxes so they pay their fair share – and help pay for the public investments their businesses will benefit from.”

Cole Simons, the One Bermuda Party Opposition Leader, said: "In one of the strongest parliaments in the world, President Biden showcased Bermuda in an unprecedented manner, unlike any other US President in the past 20 years. He did the unthinkable and singled out Bermuda as a "tax haven’ on an international stage, and it should be extremely alarming for Bermuda.

“Through the President, the Biden administration made it very clear that Bermuda is in their crosshairs when it comes to tax reform and offshore financial centres. With a global audience of millions of people, this is not the type of attention this island needs.”

Mr Simons added: “Our Government, a delegation from our global reinsurance companies, delegates from others in the International Business sector, along with the Opposition, should go with haste to Washington to educate and remind our US friends of the critical role that Bermuda plays to support the US economy.

“Bermuda must not take this serious threat lightly, we must take action now, as this could also be the beginning of a strategic threat being foisted upon all offshore centres by the OECD and the EU in regards to international corporate tax harmonisation”.

The Ministry of Finance, in a statement, said Bermuda had demonstrated a longstanding commitment to "transparency and regulatory excellence over the years to build a reputation as a good place to do quality business".

It said considerable time and resources had been used to achieve "strong and robust legislative and operational frameworks to ensure compliance with international requirements".

It added: "The comparative tax differences that exist in the international arena are due to the different models that are adopted by different jurisdictions. Our tax system, which was developed in the nineteenth century, was shaped for efficiency and fairness to Bermudian taxpayers."

The Ministry said: "We recognise the United States of America as a key strategic partner with whom we enjoy a close and productive relationship in business as well as in education and scientific matters."

It said that regarding tax matters it works closely with the United States Internal Revenue Service through various agreements to exchange tax information.

The Ministry also said: "Bermuda is actively involved in discussions relating to tax and other related matters, either as part of the relevant global meetings or through bilateral communication with foreign government and public officials. We will continue our work in that regard, with the US and with other key allies."

John Huff, chief executive officer of the Association of Bermuda Insurers and Reinsurers, said: "With a new administration and changes in international leadership, it’s important to continue to educate and advocate on the benefits the Bermuda international market brings to the US and other countries.

"There is a big difference between jurisdictions which are shrouded in secrecy, and jurisdictions which combine fit-for-purpose revenue structures with international co-operation and transparency."

Mr Huff said Bermuda’s position on transparency and the commitments on beneficial ownership demonstrate that it should not be "lumped in with others, who take a very different approach".

He added: "Bermuda has worked really hard to develop a strong reputation globally on transparency, on world-class regulatory frameworks, and on physical, economic substance requirements and fares really well when assessed internationally."

Mr Huff also pointed out that in the US, Abir members and other Bermuda re/insurers had, among other things, paid $9.2 billion for 2017-2019 California wildfires; paid $208.7 billion to US policyholders and cedants during the past 20 years; and contributed more than $65 billion between 2001 and 2017 to US.

In addition they paid a total of $22 billion to rebuild US Gulf and Florida coasts from seven hurricanes in 2004-2005, including nearly 30 per cent of insured losses from Hurricanes Katrina, Rita and Wilma; support 25 per cent of US medical liability insurance and reinsurance market; and paid $2.5 billion of New York City World Trade Centre terrorism attack claims.

Roland “Andy” Burrows, CEO of the Bermuda Business Development Agency, said: “The BDA, together with our industry associations, working groups and the Bermuda Government, are committed to promoting open markets, corporate responsibility, and innovation. Bermuda is recognised as having a robust framework in relation to tax transparency and compliance with international standards.

“Through direct international advocacy, the BDA from its inception has successfully led business delegations to promote Bermuda’s world class and internationally recognised platform that supports business solutions to complex business challenges.”

Mr Burrows added: “Bermuda’s international business activity is significant to the world’s economy. In 2017, two-way trade with ten of its largest trading partners totalled more than $65 billion.

“The USA is Bermuda’s most significant trading partner with two-way trade between the countries totalling $34 billion in 2017. Bermuda is an important strategic partner to the US in many areas, including insurance, law enforcement, border security, aviation, space, marine research and education. More than 8,000 Americans live and work in Bermuda, and 650,000 Americans visit Bermuda normally each year. Bermuda supported over 315,000 jobs in the US in 2017.

“With three decades of success helping the US close the insured protection gap, particularly in hurricane, flood and fire catastrophe coverage, Bermuda is now poised to partner with the US to reduce the climate risk protection gap.

“Recognising that international tax policy is a matter for the Government of Bermuda, the BDA stands ready to assist the Government in dispelling any misconceptions about our economic model“.

This story has been updated to includes quotes from the Ministry of Finance, Roland Andy Burrows, CEO of the BDA, and John Huff, CEO of Abir.

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Published April 30, 2021 at 8:27 am (Updated April 30, 2021 at 8:27 am)

Leaders react after Biden labels Bermuda a tax haven

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