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Lessons learnt from 2018 tax reform debacle

So what can we learn from Bermuda’s 2018 tax reform debacle? Three perennial problems for the island are underscored by these unfortunate events. The first is Bermuda’s lack of competent policymakers — in the One Bermuda Alliance as well as the Progressive Labour Party.

Robert Stubbs is Head of Research at Seed Bermuda, a local think-tank devoted to the island’s sustainability. Having previously served as Head of Research for Bank of Bermuda, Mr Stubbs is a chartered financial analyst, holds an International Bond Dealers Diploma and completed the ACAS actuarial exams

No one can possibly be competent in all realms, but lack of competence becomes a particular liability when one refuses to acknowledge inherent limitations. Attracting more capable politicians to each party and developing the capacity of the island’s existing policymakers will take time, but both should be considered national priorities of the utmost importance.

Bermuda’s second obstacle highlighted here is our lack of transparency. Had the Premier not been allowed to conceal his so-called “parameters” from public view, it would have been far less likely that the reinsurers were granted such generous concessions. Greater transparency of the island’s tax reform process needs to be enforced.

In fact, greater transparency of Bermuda’s overall tax system would assist in holding our policymakers to account. A comprehensive, regularly updated publication of Bermuda’s tax rates complete with individual tax concessions would be of use. Indeed, the willingness of our politicians to serve private interests at the expense of the public’s wellbeing suggests the island would benefit more generally from significant “open government: reforms.

Finally, our third problem exposed in these unfortunate proceedings is the inordinate undue influence of international business companies in Bermuda. International business has now so insinuated itself into every corner of Bermuda’s policymaking that today it frequently is impossible to tell where government ends and global finance begins.

While individual politicians and finance executives may benefit from such cosy relations, as evidenced by our tax reform debacle, this often occurs to the detriment of the island’s good governance.

Of course, our challenges in these areas are interrelated. The intensity of the third increases with the first two, while the degree of the second is encouraged by the first and third, and so on. No doubt, it will take time to convert the island’s vicious circle of poor governance into a virtuous spiral.

The Government now has announced its intention to convene yet another Tax Reform Commission in April. Applying our lessons learnt from the previous tax reform debacle to our new reform initiative suggests the following:

• The island’s next Tax Reform Commission should include an international tax expert as a full-time commissioner to assist with the deliberations. Since 2015 — and at our request — the Caribbean Regional Technical Assistance Centre, the IMF’s regional offices in the Caribbean, has produced two reviews of Bermuda’s tax system. So Cartac would make an obvious choice as the source of such expertise;

• The Tax Reform Commission’s official terms of reference should include the full set of objectives and constraints guiding the reform process

• The Tax Reform Commission should not include a representative from among the island’s international business executives. This is not to say the input of international business executives in the reform process should be discouraged. Companies or their lobbyists should be afforded ample opportunity to make submissions to the commission if they wish, and if the need arises it is appropriate the commission seeks input from international business executives

Robert Stubbs is Head of Research at Seed Bermuda, a local think-tank devoted to the island’s sustainability. Having previously served as Head of Research for Bank of Bermuda, Mr Stubbs is a chartered financial analyst, holds an International Bond Dealers Diploma and completed the ACAS actuarial exams. Seed Bermuda produces research, policy analysis, advocacy and public awareness campaigns in service to a more inclusive, resilient and sustainable Bermuda. In pursuit of its mission, Seed Bermuda encourages greater accountability from the island’s politicians and business leaders, and more active participation by the public in decisions that affect us all. This is the second of a three-part series. In part three, we address the challenges of achieving significant deficit reduction while stimulating a meaningful economic recovery

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Published March 21, 2022 at 7:59 am (Updated March 21, 2022 at 7:54 am)

Lessons learnt from 2018 tax reform debacle

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