Bermuda to help US combat tax evasion by its citizens
Bermuda is set to sign on to new US imposed regulations to combat tax evasion by Americans, says Finance Minister Bob Richards.
And similar arrangements with the United Kingdom are certain to follow.
According to Mr Richards, Government will decide how Bermuda will comply with the US Foreign Account Tax Compliance Act (FATCA) which would require foreign financial institutions to automatically make available to the Internal Revenue Service details on accounts held by US taxpayers or by foreign entities in which US taxpayers own a substantial interest.
Mr Richards said Bermuda had little choice but to accede to the US demands, and that the UK has asked for a similar arrangement.
Government had waited to see how other jurisdictions would respond to the US demands and is now in a position where a decision will be made in a matter of weeks, Mr Richards said.
All offshore jurisdictions are “having our hands forced,” he added. “It's a question of how we go about it, how we negotiate it. There’s a couple of different models that are acceptable to the US. We’ve been examining which one is best for us. That decision will be made very shortly.”
Bermuda’s Tax Treaty with the US already provides for information to be passed on to the US Government, upon request.
“The big hurdle here with FATCA is that this is now being taken a giant leap further where they are demanding that information on their citizens overseas be provided automatically by way of computer data.
“Because the US has such a big stick they can make this demand and they can make it stick.
“I don’t think there’s any question of whether we are going to do it. We have to.
“And the United Kingdom government has basically said to us ‘whatever you do with the US, you have to do with us.’
“The international environment, as it relates to tax matters, is such that offshore financial matters are under a lot of scrutiny and we have to make the adjustments that are in the interests of Bermuda so that we can stay in business and grow our businesses.”
But Bermuda does not face the same kinds of threats to its business from such scrutiny as other jurisdictions which thrive on secrecy, he noted.
“Bank secrecy, data secrecy — we gave that up in 1986-88 (with the US Tax Treaty). So it’s not a big issue here,” he said.
But Bermuda does get lumped in by international media with other jurisdictions, such as the British Virgin Islands, which are tax havens and which help people hide huge sums of money.
“We try extremely hard to differentiate ourselves from countries whose principal business is hiding money. Our principal business is risk management. And we provide that risk management to most of the major nations of this world. We provide value here in Bermuda.”
While Bermuda shares some attributes with other offshore financial centres, such as size, British law and good weather, “what we actually do in Bermuda is different. And it's a challenge for us to have to continue to highlight that differentiation in the face of an onslaught of being damned by association.”
Mr Richards continued: “There is no secrecy, we are not a tax haven. Is the US a tax haven? The biggest tax haven in the world is the state of Delaware.
“Let’s forget about these silly labels. Companies, particularly multinational companies operate in a way to minimise their taxes. Their shareholders consider that to be a sworn duty — to mitigate their taxes.”
Still, larger and more powerful jurisdictions are constantly seeking ways to get more tax revenue into their national coffers, and offshore jurisdictions are an obvious target.
“It is a threat, there’s no question about that. We are a guppy swimming in an ocean of sharks. There’s no question about that. We are fully aware of that.”
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