Bermuda

Bermuda singled out in UK tax avoidance debate


By added on 15/03/2013

Bermuda has once again come under the spotlight in the debate about multinational corporations and tax avoidance, reports the Royal Gazette.

During a debate this week in the UK’s House of Commons, a UK MP said Britain “is responsible for some of the biggest tax havens in the world,” singling out the British Overseas Territories of Barbados, the British Virgin Islands and Bermuda.

Labour MP Fiona Mactaggart who represents Slough, made the statement during a Treasury Q&A session in the Commons.

Ms Mactaggart asked the Exchequer Secretary to the Treasury, David Gauke, what plans he has to increase corporation tax payments in the UK by multinational companies.

Mr Gauke stated the UK Government “are determined to ensure that multinational companies pay their fair share of tax. The UK is committed to taking multilateral action through the G20 and the OECD to tackle the issues of profit-shifting by multinationals and erosion of the corporate tax base.

“The OECD presented its initial report on addressing these issues at the G20 meeting in Moscow last month and will present a comprehensive action plan to tackle them at the G20 in July this year,” Mr Gauke added.

Ms Mactaggart replied, “Even if the OECD produces a decent action plan, nothing will happen before September, yet Britain is responsible for some of the biggest tax havens in the world: Barbados, Bermuda and the British Virgin Islands received more foreign direct investment than Germany and Japan in 2010. When did the Minister last talk to the Foreign Secretary about what he could do about these tax havens?

In response, Mr Gauke said, “It is worth pointing out that these places are not simply colonies in which we can direct orders; they have a degree of independence. We are working with other countries at the G20 and the G8 and through the OECD to ensure that we have a modernised tax system, which includes addressing jurisdictions where there is a lack of transparency.

“The point I would make is that we want to have an international tax system under which economic activity is taxed where that economic activity takes place. The fact is that the international rules have not moved with the times, but they need to do so,” Mr Gauke added.

With many governments mired in debt and working to balance their budgets, tax avoidance has become a hot button topic. Lawmakers in both the US and UK have proposed measures to try and close loopholes and regain revenues lost through tax avoidance.

While Bermuda is often singled out for enabling tax avoidance by levying no corporate tax on businesses, Britain has, at the same time, been slashing its own corporate tax rates. Since 2007, Britain has cut its tax on corporate income from 30 per cent to 24 per cent. And just last December, it was cut further, bringing the rate in line with rivals like Ireland and Luxembourg.

The UK’s Chancellor of the Exchequer, George Osborne announced Britain’s rate would be cut an additional one per cent bringing the rate of corporation tax to 21 per cent in April of 2014.

More than 20 companies left the UK for tax reasons from 2007 to 2011, according to UHY Hacker Young, one of the UK’s top accounting and auditing firms.

Mr Osborne said the latest tax cut compares favourably to rates elsewhere including the 40 per cent levy in the US, 33 per cent in France and 29 per cent in Germany. He told The Guardian newspaper at the time that it was the lowest rate of any major western economy and that it was “an advert for our country that says: come here; invest here; create jobs here; Britain is open for business.”

The most recent cut brings the UK corporation tax rate in line with Luxembourg, which also charges 21 per cent on business profits, but it’s still higher than that of Ireland which has a rate of 12 per cent.