Bermuda labelled ‘notorious tax haven’ by new report
Bermuda has been branded a “notorious tax haven” by a new report on the use of offshore financial centres by US corporations aiming to cut their US tax bill.
The report, prepared by Richard Phillips and Steve Wamhoff of Citizens for Tax Justice and Dan Smith of the US Public Interest Research Group (PIRG) Education Fund, is entitled “Offshore Shell Games 2014: The Use of Offshore Tax Havens by Fortune 500 Companies”.
One graphic cites Bermuda at the top of a list, declaring that profits reported collectively by American multinational corporations to Bermuda in 2010 were about $94 billion — money that if it had been reported as US income, would become taxable by the US Government.
From Apple and American Express to Nike and Citigroup to Google and Microsoft, the report singles out companies for not paying as much in US taxes as they could, if they declared all of their worldwide income to the Internal Revenue Service.
In a “name and shame” exercise over America's largest companies, the report's executive summary claims: “Many large US-based multinational corporations avoid paying US taxes by using accounting tricks to make profits made in America appear to be generated in offshore tax havens — countries with minimal or no taxes.
“By booking profits to subsidiaries registered in tax havens, multinational corporations are able to avoid an estimated $90 billion in federal income taxes each year. These subsidiaries are often shell companies with few, if any employees, and which engage in little to no real business activity.
“Congress has left loopholes in our tax code that allow this tax avoidance, which forces ordinary Americans to make up the difference. Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.”
The report states that some 72 percent of the Fortune 500 companies maintain subsidiaries outside of the US.
Most of the companies the report names as having subsidiaries in Bermuda, such as Illinois Tool Works, Stanley Black & Decker and Marriott International, have no working presence on the Island. However, some, like insurance and reinsurance broker Marsh & McLennan, which has 23 subsidiaries in Bermuda, generates genuine profits and employs people through its Island operations.
While the report's authors describe Bermuda as a “notorious tax haven”, their view is not shared by the US government.
Last December, US Consul General to Bermuda Robert Settje confirmed the US did not regard Bermuda as a tax haven. That statement was made as he and Finance Minister Bob Richards were signing the intergovernmental agreement to implement the Foreign Account Tax Compliance Act (FATCA) to promote transparency on tax matters.
Also US Attorney General Eric Holder stated in 2010, while visiting the Island and meeting with the Government on matters of mutual concern, that he would not characterise Bermuda as a tax haven.
Also the OECD ‘white-listed' Bermuda and declared it was not a tax haven nearly five years ago.
Meanwhile, as previously reported in The Royal Gazette, research by a professor in Australia found that the worst examples of bank secrecy, money laundering and tax fraud can be found in the world's biggest economies.
Jason Sharman, a political scientist at Australia's Griffith University, started out with a budget of $10,000, as he sought to find out where and how he could open secret bank accounts and form anonymous shell companies.
His work was highlighted by leading financial magazine The Economist. Prof Sharman found it more difficult to open a secret bank account in Bermuda than in Delaware. And he was able to form a company in the UK, without providing identification, in less than an hour over the internet.
Useful website: The report can be found at http://uspirgedfund.org/sites/pirg/files/reports/USPIRG-CTJ%20OffshoreShellGames.pdf