Bermuda’s premier is not ready to sign an international transparency convention that he said Britain’s prime minister had planned to achieve ahead of the G8 summit in Northern Ireland next week, potentially scuppering a broad deal.
Bermuda’s Premier Craig Cannonier told Reuters on Wednesday he was ready to accept wider sharing of information with international tax authorities but was not ready to commit to signing a convention already agreed by more than 50 countries.
“There’s some clauses in there that we need to look at, that may need to be adjusted, and … our finance ministry is going over it with a fine-tooth comb,” Cannonier said in a telephone interview.
A deal could give British Prime Minister David Cameron a coup against tax campaigners who question Britain’s commitment to the issue, given the prominent role played by British Overseas Territories in facilitating tax evasion, avoidance and the hiding of stolen assets.
Cameron has invited the mainly Caribbean territories to London in advance of his hosting the annual gathering of the G8 group of leading economies, at which he has put tax avoidance and evasion high on the agenda.
Cameron previously said he would like the territories to sign up to the convention but although they share Britain’s monarch as head of state, the British government’s writ does not extend to the self-governing states, so Cameron must rely on persuasion to secure an agreement.
Murray Worth, a campaigner with the British anti-poverty charity War on Want, said Cannonier’s comments showed Cameron needed to take a tougher line on the territories.
Bermuda has no corporate income tax, which has helped it become a major international center for reinsurance. Many big multinationals, including Google, also have subsidiaries there.
The island denies being a tax haven but is regularly accused of facilitating tax avoidance by large companies.
Multinationals typically park intellectual property (IP) in letter-box companies on the island. These companies then charge fat fees for the use of the IP to affiliates in countries where the groups have big sales, thereby channeling profits to the island, which levies no corporate income taxes.
Cannonier said it was unfair to blame Bermuda since it was “only one link in the chain” but added the country could tighten rules so that Bermuda-registered subsidiaries needed to have more economic substance on the island to enjoy its tax benefits.
Cannonier said Bermuda already met most of the standards in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, including having a register of beneficial owners of companies that other tax authorities can check.
However, he said the convention, drafted by the Organization for Economic Co-operation and Development, a body of mainly rich nations, had potentially damaging elements for Bermuda.
War on Want said the convention did not go far enough and told Cameron to push for greater transparency standards, including on trusts as well as companies.
In May, the territories, which also include the Cayman Islands, the British Virgin Islands and the Turks and Caicos Islands, agreed to share taxpayer information with Britain, France, Germany, Italy and Spain, but the convention will include many more countries and more information.
Cannonier questioned whether Cameron would achieve broad agreement from all the territories this week, to sign up to the Convention.
However, a spokesman for the Cayman Islands government said it had agreed on Friday to commit to the Convention.
A British government spokeswoman declined to say what kind of deal Britain hoped to achieve this week. A spokesman for Cameron added that the prime minister expected to continue to see progress on transparency “in the context of the G8.”
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