“It is a matter of sovereignty.” The Bermuda Islands are digging against the global tax deal

Bermuda’s political and business elite are responding to the G7 ‘s minimum corporate income tax requirement, as they did with the Atlantic hurricane. Officials are looking to weather the storm and keep the 19th-century revenue regime intact, leaving the company’s profits intact.

In an interview with the Financial Times Curtis DickinsonBermuda’s finance minister said he was disgusted with the new levies while the tax haven of the island’s estimated 64,000 people was still battling both the Covid-19 epidemic and the 2008 financial crisis.

“The Bermuda Islands have the right to decide for themselves whether a tax system is appropriate for their jurisdiction,” he said.

“We have a system that has been in place for 200 years. It’s not perfect. That really requires some clarification. But we would like to do it ourselves, no one would have to tell us to change our system to meet some global initiative. “I would say it is a matter of sovereignty.”

Bermuda Treasury Secretary Curtis Dickinson is a former Wall Street investment banker © Achilles Simmons / FT

Corporate profit taxation will make the Bermuda Islands more difficult for bureaucratic businesses. Currently, Bermuda accumulates through wages, property taxes, and customs duties levied on international companies.

“The current tax system in Bermuda. ,, based on consumption. “It’s the function of trying to be simple, manageable, simple files,” he said. “It simply came to our notice then. It has not changed to encourage people to move here. It was what it was. The system works for us. “

Pressure on tax havens escalated this month as the G7 countries bridged the gaps used by multinational companies to reduce their tax bills by agreeing to Minimum global 15% charge on corporate income. Something will actually change, however, depending on the wider global negotiations – that is, the aftermath of Bermuda remains hypothetical.

The sensitivity of the question quickly becomes apparent to a visitor to Hamilton. In more typical times, the Bermuda capital gathers all the pizzas where locals brag about the large number of actuaries. Start asking questions about taxes և corporate lips press tighter together. Trade Associations և Leading companies either avoid answering or pass inquiries to Dickinson.

Restaurant in Hamilton. Dirty Bermuda weather creates a pleasant lifestyle © Nicola Muirhead / Bloomberg

BF&M և Aon headquarters. Insurance amounted to about a quarter of GDP in 2019, © Achilles Simmons / FT

The finance minister, who has carefully chosen words, is a former Wall Street investment banker who worked for companies such as Donaldson, Lufkin & Jenrette և Credit Suisse First Boston before joining the government. He was educated at Morohus College, Atlanta, a historically black institution where Martin Luther King, Jr. received his bachelor’s degree from Columbia University Business School.

Dickinson argues that it is unfair to group the Bermuda Islands into tax havens that have more corporate mailboxes than people. He said it was an “anomaly” when Google, through its Dutch holding company, transferred tens of billions of dollars over the past decade to the Bermuda Islands under an intellectual property licensing scheme called “double irish dutch sandwichGoogle has rescinded the agreement, which allowed it to delay the payment of US taxes.

According to Dickinson, due to its tax system և regulated regime, Bermuda has become a proper financial center. The big buildings of the leading insurers – AIG, Chubb և BF&M, among them, are shaking in the capital. Recent arrivals include: Conduit Re:, which raised $ 1.1 billion last year through a listing on the London Stock Exchange և Hello, the reinsurer was launched in 2020 with a $ 1 billion stake in Carlyle, Hellman & Friedman և’s management.

Xabi Building in Downtown Hamilton © Achilles Simmons / FT

Renaissance Re is based in the capital © Achilles Simmons / FT

“We want companies here that have shoes on the ground,” Dickinson said.

Responding to climate change gives reinsurers an extra incentive. Andrew Engler, CEO Kettle, a beginner who uses machine learning to better understand fire risks, said he set up his own holding company in Delaware, based his operations in Bermuda to be closer to action, and to a regulatory system that could operate faster than the state. – US state licensing regime.

“It’s very well built,” said Engler, a Californian who also finds the Bermuda Islands weather acceptable. “You have this crazy island, which is probably the most powerful financial market for climate change we can all imagine.”

Dickinson’s challenge is that the economy of the Bermuda Islands, as he puts it, “will not change.” Reinsurance and other “international business activities” accounted for about a quarter of GDP in 2019. official statistics display. In contrast, entertainment and hospitality generated about 4 percent in a turquoise resort.

Bermuda Islands 2019 GDP bubble chart by industry.  Financial activity accounts for a significant portion of the country's GDP

The question for Bermuda is how sensitive tax reinsurers might be. Donald Trump’s 2017 tax changes have already made it less attractive for US insurers to buy reinsurance from Bermuda. It remains to be seen whether the application of corporate taxes would curtail the regulatory benefits of running an reinsurance business on the island.

“It will definitely not be a positive thing,” said Brian Schneider, an analyst at Fitch Ratings. He added. “It did not seem to be enough to destroy the whole purpose of being on the island.”

For their part, the Bermuda authorities do not want to rush. For adjusted inflation, GDP for the fourth quarter decreased by 4% on an annualized basis. Dickinson noted that the Bermuda authorities are trying to tell their counterparts in larger countries that now is not the time to rectify the situation.

“We are obviously concerned that there is a risk of an approach that may not work for everyone,” he said. “We have had a period of sustained low economic growth. I think the idea of ​​imposing more taxes is tantamount to applying brakes to the economy.”

Insurers like AIG play important role in Bermuda economy © Akil Simmons / FT

Front acacia street in Hamilton. The tax system is difficult for the working class Bermuda © Nicola Muirhead / Bloomberg

Dickinson’s position is more inconvenient, as not only foreigners are concerned about the taxation of Bermuda. In 2018, the government’s own Tax Reform Commission highlighted the need for change after meeting with more than 50 stakeholder groups, including local and international businesses.

“The recurring theme of almost all stakeholder groups was that the tax structure in the Bermuda Islands was neither fair nor just,” the report said. “There was a consensus. “Bermuda’s tax structure has placed a disproportionate tax burden on those who can afford to pay the least.”

For all its attractiveness to international business, the system is hampered by working-class Bermuda people who say their most essential taxes come in the form of high prices for imported goods. Because a few nights ago the conversation turned into pocket books with the following questions Harry’s bar, the popular Hamilton water hole for the actuarial collection, the bartender allowed the visitor to enter with a joke.

“It’s not a tax haven, it’s a hidden tax,” he said as he offered his thirsty customer $ 12 worth of gasoline.

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