Minimum corporate tax rate
As I am sure all your readers know, the G7 and now the G20 are pushing for a worldwide minimum corporate tax rate of 15 per cent.
There has been more than one concerned reaction to this news in these pages, the latest from Bob Richards, the former finance minister.
I am not an economist, but has anyone considered there may be some benefit to Bermuda in this proposal?
If Bermuda had a corporate tax (perhaps not 15 per cent to start with) and no payroll tax, would all the insurance companies flee? Has anyone asked them? If the writing is on the wall for “tax havens” — which anyone would want to live in — why leave?
Additionally, if payroll tax were abandoned, not only would tax collection be easier but it might be an incentive to employ more Bermudians.
There could be another significant benefit: the total corporate tax — set at the right level — should outweigh the payroll tax revenues and go some way to paying down the deficit.
As Mr Richards pointed out “multinationals with paper Bermuda companies for tax purposes are the target”. But do we mind if they leave?
Again, Mr Richards said in the article: “They were ridiculously costly to Bermuda because they were hurting our reputation and the revenue from them was minuscule.”
I suggest the first step is to invite the insurance industry leaders and finance directors for exploratory talks to assess their reaction to abandoning payroll tax and introducing corporate tax at a level that is calculated to exceed the revenues from payroll tax. (I’ll let the Accountant-General figure that out)
At least we would then have a genuine assessment of the potential flight to other jurisdictions.