Bermuda Finance Chief Warns Nations of Risk of Overtaxing Business

By | October 2, 2009

The world’s wealthiest nations risk harming “the goose that lays the golden egg” if they overtax businesses, Bermuda’s finance minister said on Thursday, adding that her island nation had surpassed other offshore centers in meeting new tax rules.

“As a minister of finance, we’re always going to be looking for money, but you’ve got to be careful that in looking for money you don’t bite the hand, the goose that lays the golden egg,” Finance Minister Paula Cox said in an interview.

Cox is in the United States to reassure businesses of the jurisdiction’s hospitable financial environment and to open a new lobbying shop in Washington.

“We felt it was important to continue to heighten our visibility,” she said.

Some of the world’s most developed countries in the Group of 20, including the United States and France, have undertaken a global hunt to find tax evaders and return revenue that has been hidden in low tax or no tax jurisdictions to their countries’ coffers.

A Senate panel has estimated that individual and corporate tax cheats cost the United States $100 billion a year.

“We can’t tax to the hilt international businesses because they will exit,” Cox said.

“My limited experience of corporate leaders is that they are going to be looking out at what they can get in terms of best shareholder value,” Cox said. “Whether they’re in Bermuda or Timbuktu.”

“If they don’t wish to pay the taxman they’re going to look at ways that they can seek to avoid paying it, not evade, but avoid paying it.”

Bermuda is one of the world’s richest countries, with per capita income of more than $75,000 in 2005, according to the International Monetary Fund. There are no taxes on unearned income or capital gains.

This year, Bermuda, a 20-square-mile island and British territory in the Atlantic, has moved to The Organization for Economic Co-operation and Development’s (OECD) “white list” from its “gray list” of questionable tax jurisdictions. It has also been named to serve on an OECD tax panel. The OECD tracks tax evasion internationally.

Cox said Bermuda’s efforts to improve its compliance with tax regulations and transparency regarding tax information made it “distinguished from the herd” of some offshore jurisdictions in the Caribbean that have been criticized for lax regulation and little or no transparency.

“We have focused on quality as opposed to quantity,” Cox said. “We tend to have real people on the ground. We aren’t known as a brass plate jurisdiction. We don’t have an issue in terms of having thousands of banks. We have four banks.”

A high-profile U.S. congressional investigation into tax evasion and an acknowledgment by Swiss bank UBS AG that it promoted tax avoidance to clients in the United States have provided impetus for the international campaign against tax havens.

Bermuda is the third biggest reinsurance center after New York and London and is the second biggest captive insurance domicile after the United States, according to the IMF.

(Additional reporting by Pascal Fletcher in Miami; Editing by Toni Reinhold)

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