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Bermuda signs up to global tax system overhaul plan

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G7 leaders pose on a beach in St ives, Cornwall this weekend. They agreed on a 15 per cent global minimum tax at their meeting. Leaders from left, Canadian Prime Minister Justin Trudeau, European Council President Charles Michel, US President Joe Biden, Japan's Prime Minister Yoshihide Suga, British Prime Minister Boris Johnson, Italy's Prime Minister Mario Draghi, French President Emmanuel Macron, European Commission President Ursula von der Leyen and German Chancellor Angela Merkel. (AP Photo/Patrick Semansky, Pool)

Bermuda is among 130 jurisdictions to agree to the outline of a two-pillar plan to overhaul the global tax system.

But the island has made known its concerns over the timeline for the project and about “technical and practical” aspects of the plans, which include a global minimum tax rate of at least 15 per cent.

The agreement came out of Thursday’s meeting of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, of which Bermuda is a member.

The OECD said that a detailed implementation plan together with remaining issues will be finalised by October.

The statement agreed upon by all but nine of the 139 Inclusive Framework members outlines proposed international tax system changes, designed to ensure that large multinational companies who book significant profits in low-tax jurisdictions pay more tax in the countries where they generate their revenue.

The OECD published the full outline of the plans yesterday.

The Cayman Islands and the British Virgin Islands were among other Inclusive Framework members who joined Bermuda in agreeing to the statement. The nine who did not join the statement were Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Peru, St Vincent and the Grenadines, and Sri Lanka.

The Bermuda Government said in a statement yesterday morning: “As a country committed to transparency, co-operation and high levels of compliance with international standards, the Government of Bermuda joined the Statement on a new framework for international taxation arising from the OECD (“Inclusive Framework”) meeting of July 1, 2021, and looks forward to supporting its ongoing technical discussions ahead of the meeting of G20 Finance Ministers in October 2021.

“Bermuda has been actively involved in ongoing discussions relating to this initiative to present positions that reflect the national interest and that of our various stakeholders.

“As part of that approach, we recognised the need to join with other members of the Inclusive Framework to reach this position supported by a significant majority of the membership.”

The Government indicated that it had registered concerns, particularly in relation to the financial services sector and timeline for effective implementation.

Curtis Dickinson, the Minister of Finance, said: “We fully intend to remain an active participant in the ongoing work of the Inclusive Framework to complete the development of an appropriate plan.

“We have noted areas of concern at a technical and practical level, which we look forward to working to resolve constructively in the months ahead.

“Financial services is a crucial area of focus for us, and the private sector, given our role as a global hub in key industries such as insurance/reinsurance. Businesses in this sector aid many of the world’s most vulnerable in adversity, and provide climate risk insurance which will be at the heart of making our planet sustainable.

“In relation to the former, Bermuda re/insurers have paid out more than a quarter of a trillion dollars over the past 20 years in claims arising from both natural and man made disasters in the US and EU alone.

“We remain committed to working collaboratively with partners in the public and private sector to maximise benefits which can be achieved as a result of this initiative.”

KPMG in Bermuda tax experts Will McCallum and Sarah Robey described the agreement as “historic” in a statement this afternoon.

They said: “Pillar One of the agreement is a significant departure from the standard international tax rules of the last 100 years, which largely require a physical presence in a country before that country has a right to tax.

“Pillar Two secures an unprecedented agreement on a global minimum level of taxation which has the effect of stipulating a floor for tax competition among jurisdictions.

“The five-page statement reflects high-level agreement on key political questions and design features of Pillars One and Two following a two-day meeting of the Inclusive Framework.”

Curtis Dickinson, the Minister of Finance (File photograph by Akil Simmons)

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Published July 03, 2021 at 8:12 am (Updated July 03, 2021 at 8:12 am)

Bermuda signs up to global tax system overhaul plan

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