Bermuda

Richards: Bermuda’s critics have double standards


By added on 13/10/2015

A blistering attack on major countries who brand offshore financial centres as tax havens has been launched by Bob Richards, reports the Royal Gazette.

The Minister of Finance warned that pressure on the offshore sector from abroad will continue into the foreseeable future.

Mr Richards, speaking at the launch of a British Virgin Islands drive to promote the country’s financial services sector, said that he had been shocked by the “vitriolic and hyperbolic rhetoric” directed at the offshore sector from non-governmental organisations in the UK when he first visited Britain as Minister of Finance.

Mr Richards told the BVI audience that previous tax regimes elsewhere obliged people and corporations to pay the taxes they were legally required to pay.

But he added: “That was pretty cut and dried — now paying taxes has morphed into the blurry and slippery world of the ‘moral imperative’.

“Judgements are being made about multinationals paying their ‘fair share’ to taxes in a particular jurisdiction ... one thing it means to me is that having failed by means of laws and tax treaties to collect the tax revenue they want, major industrialised countries are turning to moral justifications that are replete with inconsistencies, double standards and contradictions.”

Mr Richards said that member states of the Organisation for Economic Cooperation and Development (OECD) had moved from law-based criteria on tax evasion, which is illegal, to “aggressive tax avoidance” — which has no definition in law.

And he added that — rather than tackle their own tax systems — major nations were “shifting the goalposts” to make offshore jurisdictions comply with increasingly stringent requirements or face being blacklisted.

Mr Richards said: “The truth is you can’t prosecute somebody for aggressive tax avoidance so instead offshore financial centres are continuously harassed with blacklists and other such threats.”

But he added that “double standards” in the international community meant that Bermuda and other places had to meet higher standards that there were not applied to many of the industrialised nations group G7.

“There are more billionaires resident in the UK per capita than anywhere else in the world. There are more French-speaking people in London than virtually any French city except Paris. I suspect it is not the climate that is the attraction, but rather the tax climate,” said Mr Richards at last month’s event. “Yet the UK continues to pressure Overseas Territories.”

Mr Richards added that the UK was to draw up a central register of beneficial owners of companies registered in Britain and asked Overseas Territories to the same.

He said: “They were surprised and somewhat sceptical when I first advised them that Bermuda has had such a register for about 70 years.”

The Bermuda register is not available to the public, as the British one will be, but has been freely available to international law enforcement agencies since the 1980s and to tax information treaty partners who have a legitimate reason to check on a Bermuda corporate client.

Bermuda’s register is mandatory, while the UK’s will be voluntary and Bermuda insists on knowing who is behind a trust arrangement, while the UK will accept trustees, who could be a bank, law firm or trust company.

Mr Richards said it had been suggested Bermuda could deflect criticism by introducing corporate income tax, even if it was at a low rate.

But he added: “The Republic of Ireland has been severely criticised and labelled a tax haven even though they have a corporate income tax — a relatively low income tax, but corporate income tax nonetheless.”

And he pointed out that the value of Bermuda’s financial sector was proved when its reinsurance sector paid up multibillion dollar claims on time for liabilities like the 9/11 attacks on the US while onshore companies struggled.

And Mr Richards told the BVI meeting: “Once you can show that the activities that take place in your jurisdiction actually add value to the global economy you put yourself in a position to change attitudes.”