Tax, finance and development
In a highly entertaining Dutch TV documentary, small entrepreneur Jan sets out to minimize his tax bill. That’s easier said then done! Jan quickly finds out that for someone living and working in a single country, dodging taxes is way more difficult than for large multinationals. Worse, almost everywhere Jan goes with a camera, advisors and lawyers refuse to talk to him.
However, when he visits Bermuda in the second episode, Jan is warmly received by no one less than Bob Richards, the island’s Minister of Finance. The interview is fascinating.
When Jan mentions his attempt to minimise the Dutch tax bill of small entrepreneurs, Mr Richards explains:
“As far as tax is concerned, we don’t just want anybody here. You know, very often companies are owned by companies that are owned by companies that are owned by trusts that are owned by companies. We don’t care about that chain. We want to know who the human beings are at the beginning of that chain. And that is required of every person coming to Bermuda to set up a company.”
He is saying that Bermuda only welcomes tax avoiders that do not hide information from authorities. If you want to dodge taxes by shifting corporate profits to Bermuda, you’re welcome. If you want to evade taxes by illegally hiding your wealth offshore, you’re not.
Jan responds: “Yes. And still, everwhere I go, people say, if you wanna go find a tax haven, go to Bermuda. How does that work?”
Mr Richards: “They are wrong. You know, we got stereotyped by things that are just not true.”
Jan: “Does that frustrate you, that people call you a tax haven?”
Mr Richards: “Yeah it does, because it ‘s not true, and anything that is not true does frustrate me.”
Fair enough. Let’s not call Bermuda a tax haven then, at least not without further specification, because that might suggest that Bermuda is a secrecy jurisdiction. (In TJN’s Financial Secrecy Index, Bermuda scores not nearly as bad as the Bahamas, the United Arab Emirates, or Hong Kong.) Let’s call it a corporate tax haven instead.
Jan continues: “But isn’t it a weird idea that all those billions, I think it’s 104 billion annually from the US, flow through Bermuda?”
Mr Richards: “It’s got to flow to somewhere. Right? And the fact is that the US authorities and the EU authorities know about it. Well, tax it if you like. Because our tax system suits us.”
In fact, the Minister repeats his point here: there is no secrecy involved, so you can’t blame Bermuda for anything.
Towards the end of the interview, Mr Richards emphasizes once more that Bermuda did nothing wrong:
“Bermuda has never had income tax. Ever. It’s not as though we just did this to attract companies from overseas.”
He has a point, right? After all, isn’t it unfair that Bermuda’s reputation is being damaged by other countries engaging in a race to the bottom? Bermuda isn’t in that race.
It was at the bottom all along, and has been wilfilly exploiting that position by enabling corporate tax avoidance at a dazzling scale.
It’s helpful, then, that Mr Richards has been very clear in the interview: Bermuda has no plans to introduce corporate income tax or to stop attracting billions of profits that belong elsewhere. Change has to come from outside. That sounds almost like an invitation to the EU to put Bermuda on its upcoming blacklist of, err, corporate tax havens and other tax havens.
(You can watch the full interview here, from 20:55 to 24:40)