No substance: can you hear the silence?
“In human intercourse, the tragedy begins not when there is misunderstanding about words, but when silence is not understood”— Henry David Thoreau
The greatest leadership challenge to our island in recent memory occurred in December 2018. Every single event in recent memory pales in significance. The America’s Cup, Pathway to Status, furlough days and the latest teacher strike do not compare. In fact, the event I address here ultimately will encompass them all.
The Economic Substance Act 2018, which was passed by the legislature last month, is a real game changer for Bermuda. It was debated in Parliament with very little notice given to its significance to us all. There was a rare show of unity between the Government and the Opposition, with both condemning the measures being forcefully thrust upon us by the European Union.
The substance of what the Act contains and what it truly means took a back seat. Our political leaders are now silently awaiting the economic impact. Our business community and even our local media appear to be following suit.
In the meantime, Mr and Mrs Bermuda are none the wiser. Our premier — no political leader, for that matter — has yet to explain what has taken place and neither has he told us what we can expect as a result of the passing of this Act.
Our political leaders have failed grossly to prepare us for exactly how it is bound to affect every Bermudian in a substantial way. With this Act affecting more than 10,000 companies domiciled here, it will have a significant impact.
Allow me to start by conceding that the Act, as far as I understand, is largely an EU mandate. It is in no small way related to that other big event that we are also turning a blind eye to — Brexit.
In an attempt to collect more taxes from companies operating in their jurisdiction but claiming tax exemption because of their presence here in Bermuda, it was demanded that we implement this Act or otherwise face being blacklisted or receive some other form of European economic wrath. There are several other countries that had to pass similar Acts, as Europe’s powerful rich Western countries try to collect taxes from large international companies who avoid/evade taxes by their presence in places such as Bermuda.
In essence, the Act says that if a company falls within a certain category of business operating in Bermuda, it is now required to have a “substantive” operation here. This means that companies will no longer be allowed to function on our shores, where their only footprint is a post office box.
The most prominent company doing this is Google, which moved $22.7 billion here in 2017, thereby allowing it to not pay considerable taxes in other jurisdictions. Google’s only presence in Bermuda is believed to be PO Box 666 in the Hamilton post office, while a local law firm submits relevant regulatory forms on its behalf.
This Act is now compelling such companies to establish a functioning operation here, with employees and provable business transactions generated in Bermuda, or wind up the business. Of course, this matter may well end up in the courts in trying to determine what “substantive economic presence” means, but we should no longer expect business as usual. Many thousand companies will be required to do some things differently here or leave our shores.
Sadly, our political leadership has not seized this challenge as an opportunity. The reason for this is because the challenge demands real and strong leadership. This challenge requires a decisive stance to be taken to provide the opportunity for Bermuda and Bermudians to take advantage of. This new relationship mandated by the Act ought not to be left to chance.
Firm economic leadership would have first and foremost provided an assessment after collaborating with the companies affected by this legislation and what this means for their presence here.
How many of them will be leaving our shores in the coming weeks, months or years?
How many are going to stay?
For the companies that decide to stay, what new economic activity will they generate?
Now that they are required to open office space, or other business operations, what demands will it place on the country and our resources?
What new personnel will be required to immigrate to Bermuda to assist with their business function?
How many new immigrants may we expect? How will this affect local businesses?
Most importantly, what employment opportunities will be made available for Bermudians, and what social and economic benefit will this have for our local economy?
These are just a few questions that need to be answered by our leaders in a way that involves the whole country. We hope that this is occurring behind closed doors. At the extent to which it may be occurring, it is certainly not happening with the essential public engagement that is warranted.
Our leaders are not preparing our people or steering the destiny of our country. There seems to be a burying of heads in the sand and hoping that this somehow works out favourably or at least not too destructively. This is absolutely no way to handle such a big development.
We can be sure that if a significant amount of companies wind up and leave, this will be an economic catastrophe. We certainly hope this exodus does not occur. Additionally, we may benefit fortuitously from a large number of companies setting up a physical presence here, as this will assist our local economy greatly and likely be a positive, economic game changer as well.
With recent official news that the Progressive Labour Party has governed us back into recession, our declining economy can surely use a thrust. I suspect that the Premier doesn’t believe this is the case because no one in the PLP has touted this as a real possibility.
As a country and as a people, we are woefully unprepared for whatever is about to happen. However, we will know soon — and very soon.
Our leaders have opted to duck and hide, and do what leadership does when it is not up for the challenge.
I trust that by throwing this small stone that we may get the ball rolling in the right direction. I hope this will promote a change in the Government’s unacceptable stance. Bermudians need to know how to prepare for the net effect of this in a way that doesn’t overexcite or panic the public.
Finally, just how can silence with this serious matter be putting Bermudians first?
• Vic Ball was a One Bermuda Alliance senator from November 2014 to July 2017