The perilous addiction of substance abuse
More than two months ago, I penned an opinion — “No substance: can you hear the silence?” — to bring to Bermudians' attention a piece of legislation that passed silently and with little communication of its importance to all of us and our present way of life.
I felt compelled to write a follow-up opinion — “They still don't get it” — a week later to reiterate the seriousness and the urgency of what Economic Substance Act 2018 means for Bermuda.
I even went out on a limb and proposed potential solutions for the Government, while a few others, including Nick Kempe, addressed it from a different angle. It is evident that I caught the Government's attention, but it wasn't enough to prevent this worst-case scenario from occurring.
Bermuda has now been blacklisted by the Council of the European Union. The legislation and amendments hastily passed at the end of 2018 were not enough, thus we have been labelled a tax haven.
Although the Progressive Labour Party government had more than a year to comply with EU regulations, it fell woefully short and has imperilled the whole island and our economic standards. During this period, while this tidal wave was bearing down on us, our premier was preoccupied with fintech and cryptocurrencies.
The last time Bermuda was on a blacklist was in the wake of the PLP's previous tenure when Bob Richards had to travel to Britain and Europe to delist us. This time we have been added to the EU list with other noncooperatives such as Oman, Marshall Islands, Guam and a few Caribbean islands.
David Burt has stated boldly: “This is a setback but we are confident that Bermuda will soon be removed from this list of non-cooperative jurisdictions for tax purposes.”
Fellow Bermudians, we should not be fooled; we are in troubled waters. Even if the Premier is right and we are off the list in May, this is not a trivial matter or unimportant. Each time we show up on this blacklist, it diminishes our status as a reputable jurisdiction. We can be tainted only so many times before our reputation is irreparably damaged.
If we are still on the list at the end of May, should the Premier resign for his lack of leadership on this crucial issue?
My belief is that we will not be off the list anytime soon and certainly not without more scrutiny and more onerous conditions. The Government has handled this so poorly that we still do not know whether the island will sink or swim. Additionally, this is the absolute worst timing because our economy is on a downward spiral.
International business is the key pillar of our economy and the EU has told us that it is not satisfied with our relationship in that regard. The harm that this can do to our economic and national interest is critically important. The very insightful piece by Mr Richards, the former finance minister in the One Bermuda Alliance government, which ran in the Gazette on Monday — “The external threats banging at our gates” — says it all.
The forces Bermuda is up against are formidable and the stakes could not be higher. The irony of his insightful opinion versus Christopher Famous's opinion — “Unity in face of colonial economic oppression” — does not escape me.
Mr Famous's government did not see fit to send him and Walter Roban, the Deputy Premier, to the Caribbean with a plan of unification and a strategy to prevent the EU economic substance from derailing our economy. They could have put their collective heads, resources and ideas together to do so. Instead, the opportunity was used to resort to familiar rhetoric about colonialism.
In the meantime, here is another sobering thought that we should all keep in mind and deliberate on: if economic substance requirements are supposed to make companies start complying with setting up a presence here, why have they not started to do so?
Let's think about it. Reportedly, we have approximately 16,000 companies registered in Bermuda without any real presence. Cayman Islands has 120,000 and British Virgin Islands has more than 400,000. If just 1 per cent of ours were to set up offices here to meet substance requirements, that would represent 160 companies. If each company hired ten employees, this would result in 1,600 new employees overnight. A safe assumption is that most of these employees would come from abroad. This would cause a mad scramble for office space and available apartments. This would be the result from just 1 per cent of these companies, even if 99 per cent decided not to comply or leave.
Have you seen, heard or noticed any clamouring for offices and apartments? Competition for offices should be fierce. The rental market should be buzzing and the economy should be preparing to take off like a rocket, but we are not witnessing anything like that.
So, we are truly in trouble because we are not facing up to the facts. Our government has not understood what challenge it was up against and it does not have a strategy to safeguard our national interests. The chances of this having a devastating, negative short-term impact on our economy is increasing every day while our politicians are reportedly missing meetings and deadlines.
The approach that the Government has taken up to this point is simple and familiar. It has played down the importance and significance of what is going on. It has arrogantly believed that it has this under control. When things go wrong, it hopes they will go unnoticed and unchallenged. Then out comes the spin, as though things are not really that bad. Finally, it provides the public with deflection and diversion.
Bermuda, there is a fine line between politics as usual and the irresponsible governance that we seem to be constantly getting these days. Just look at recent talking points:
• “Bermuda on EU blacklist”
• “Former CEO of Bermuda Health Council sues the Premier”
• “Government hurries to take over municipal corporations”
• “Premier attacks media in Parliament”
• “Ten months of consecutive economic decline”
• “Minister issues racist statements against incoming Chief Justice”
• “Sugar tax makes life for average Bermudians harder”
• “Healthcare costs continue to rise”
• “Educators on work to rule”
These things are not unrelated. We do not know where the island is headed or what the Government is doing. However, what is plain to see is that the political agenda does not appear to be for the benefit of the island, but for the PLP party faithful.
Mr Burt, Bermudians are hopeful that our alarm bells will not continue to fall on deaf ears to the detriment of all. This blacklist issue has been handled appallingly. We truly hope that you heed the lessons taught by your blunder. Bermudians will continue to pay the price for your failing to do so.
Come clean with us and let us know what is going on. Devise a plan to move the island forward, let us know what the plan is, what you hope for the plan to achieve, and inspire us to follow it.
What Bermuda requires is leadership, especially on this EU blacklist substance issue because the clock of destiny is ticking and soon it will be too late.
• Vic Ball was a One Bermuda Alliance senator from November 2014 to July 2017
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