A reckoning is coming
“The Treasury Department said officials from its Office of Tax Policy were ‛heartened by the positive reception to its proposals and the unprecedented progress being made towards establishing a global minimum tax’” — Reuters
The fictions we live by
Clearly, the former senator Vic Ball was not happy with United States president Joe Biden’s correct characterisation in the spring when he called out Bermuda as the uber tax haven on steroids during his address to Congress.
In an op-ed by Mr Ball, doing his best Bob Richards impersonation, which was published in this paper more than a month ago, it was obvious that he did not get the memo.
Mr Ball, in particular — as is the case with David Burt, the Premier, and the finance minister up until very recently — sounded as if it’s the 1990s where our leaders play-act as if Bermuda is a sovereign, independent, powerful and tough global player. One that, perhaps owing to our delusions, boxes way above our weight — as the tired cliché goes.
This script for one has been used repeatedly for more than 30 years since the time of Sir John Swan, our first neoliberal premier. What makes it even richer is that this type of tough talk, or the fictions we continue to live by, was coming from politicians in Bermuda who presided over a colony that does not even include the word “Bermudian” or “Bermudians” anywhere in its so-called constitution.
Although they like to use terms such as “citizens” — remember, there is no Bermudian citizenship — and “national this” and “national that” when in reality there is no Bermuda nation that those terms could be ever possibly applied to, either in a legal or constitutional context. Even the finance minister, before he sobered up, initially used the term “sovereign” and ascribed it to Bermuda, which remains nothing more than a colony of the United Kingdom, who I might add have already signed on to the deal and would throw us under the bus to ensure that they are on the right side of the Biden Administration in order to secure a favourable trade deal post-Brexit.
That memo that came from the White House in the person of President Biden simply and powerfully illustrated that Bermuda was allowed to become a tax haven on steroids in the 1980s at the sufferance of the US, Britain and the West more broadly, but that sufferance has now been exhausted and is no longer sustainable. We also note that out of all the tax havens, most of which are British colonies, he called out only one — and that was Bermuda!
Let me not just pick on Vic Ball or his ghost writer. He is in fine but clueless company, notwithstanding that the geopolitical change being actively pursued is a generational one that is motivated by real politique. I don’t think that even most of the Black political and financial elites, especially those under 50 — not to mention many of their White counterparts, save for a few within the international business sector — even have a clue as to what is inexorably coming down the road as judged by the growing momentum around the issue.
Yet what is becoming more disturbing is that up until now neither the Government in the form of the Premier nor the Minister of Finance have said anything publicly about this. Ditto the Opposition leader and his shadow finance minister, whoever that may be.
And it may now be too late for Bermuda to effect any meaningful change to the deal that has now emerged. So much for tough (delusional) talk as we are now firmly and clearly in the quo fata ferunt phase.
How did we get here?
Globally, we got here at a fundamental level because of that shift to the hard Right in terms of our political economies engineered by Ronald Reagan and Margaret Thatcher in the 1980s. This unleashed massive amounts of wealth and income inequality in the West and in the Anglosphere, in particular, over the past few decades.
Two examples: the extreme levels of wealth and income inequality I am referring to can be found in reports that Amazon had sales income of €44 billion in 2020 but paid zero in corporation tax. Microsoft, in a story that cited Bermuda’s role in this global ecosystem, noted that its subsidiary registered here in Bermuda and, similar to Amazon, paid 0 per cent in tax. However, far more egregiously it did so on €220 billion in profit. In both cases, those figures are cited in euros, not dollars.
The full name of the subsidiary based in Bermuda is Microsoft Round Island One. Microsoft Round Island One’s profit “…is equal to nearly three quarters of Ireland’s GDP”, according to those reports. Is it a surprise that the men who founded those companies are two of the five richest individuals in the world today? And if Microsoft One’s profit is equal to nearly three quarters of Ireland’s gross domestic product, compare that with the poorer nations of the world where tax evasion and tax avoidance are rampant, resulting in fewer tax dollars for the funding of healthcare, education and investment in infrastructure, to name a few.
Most of those essential services and necessary investments have become more difficult to finance out of the depleted budgets of many nations such as in Africa, providing a fertile ground for China and its debt diplomacy. Could this be why the US has an urgent need to fund these kinds of public policies in its own country?
What is to be done? Pray? The reality is that we are late to this dance. In previous pieces on this issue over the past year, I outlined the needed structural changes to Bermuda’s economy — not the least to our tax system.
The truth is that Bermuda has become too dependent on the global insurance sector and the financial service sector. More than 60 per cent of Bermuda economic activity today can be attributed to the international business sector alone. And, as in many countries, that sector has been one of the chief drivers of income and wealth inequality in Bermuda.
Since the late 1990s, wealth and income inequality have been growing exponentially right throughout the first decade of the Noughties when the Great Recession intervened somewhat to take the froth off the economy. The unprecedented growth of international business factored in a big way in this development on island. And, contrary to the myopic editorial found in this paper last week, which focused on the Government’s performance, the introduction and tepid growth as represented by our fintech sector does not represent the long-elusive economic diversity this country has needed for decades.
As with insurance-linked securities of a decade ago, it only represents more of the same because it is another facet to add to the already existing bloated financial services sector. Let’s call it Financial Services 2.0. No less, no more.
This is an economy that is crying out for the right types of interventions by way of public policies to create a more inclusive economy with racial equity being front and centre. That is why I proposed the living wage, as redistributive policies are desperately needed here. It is deplorable that the Government has seen four years go by and yet an increasingly conservative government continues to kick the can down the road on that and most initiatives that have the power to materially improve the lives of our most vulnerable — who, I might add, are the working Black poor who loyally supported the Progressive Labour Party through thick and thin.
US Treasury Secretary Janet Yellen is seeking to halt the race to the bottom on taxes. It a principle I support. I, on the other hand, have consistently called for a halt to the bottom on wages in Bermuda. Let’s see which one happens first.
Most economists and available best-in-class research globally are asserting that it is economies that are diverse and inclusive are more successful in finding sustained economic growth. Would all of this have been easier to do without trying to accomplish the above amid this crisis, such as right after the 2017 election or even after the 1998 election? That goes without saying. But that is a luxury we no longer have.
I strongly believe that a reckoning is coming for those Black political and financial elites who govern as if the neoliberal era and its basic underlying assumptions are still relevant. Most of that under-50s generation who have assumed leadership in both domains of late in both the Government and corporate sector such as Mr Ball, grew up in that post-1980s environment, which obviously informed their conservative, colour-blind view of the world. The problem for them and Bermuda, in general, is that nothing lasts for ever. Nothing ever does!
The fundamental question is whether they will be able to meet the challenge of the historic moment. For men who know little of our history and Western history at a minimum — and at a time when history is coming back with a vengeance, to paraphrase a famous quote — that is highly debatable.
• Rolfe Commissiong was the Progressive Labour Party MP for Pembroke South East (Constituency 21) between December 2012 and August 2020, and the former chairman of the joint select committee considering the establishment of a living wage