Column: Stop Being Sanctimonious, Fix Problem
[Opinion column written by David Tavares]
My fellow Bermudians, we are who we are!
Our island home consists of a group of people, organized to provide services, both locally and internationally, to our customers [individual or corporate].
Our leaders, both in the public and business sectors of our island home community have, in the past and present, continuously reminded us that the future of Bermuda rests in the hands of others elsewhere in the world. They have also told us that we must partner with these individuals and corporations to help them solve their problems.
You can imagine the impact of a letter back in the 1950’s to the Editor of the Times in London when a local international law firm employee wrote “No taxation at all”. The then British shipping industry was finding it difficult to compete in a highly taxed area.
Since the 1930’s and more so from the 1950’s onward, we have expanded our relationships with the international/offshore business community to the extent that our primary industry is no longer hospitality, but predominately international business contributing the major portion of GDP.
As a result we have, together with our partners, enjoyed enormously from the fruits of our labour. And in today’s markets we have had to remain competitive while at the same time demonstrate compliance, transparency and leadership in the global economy, specifically the insurance industry.
However, no matter how well we are organized and compliant with international standards, perception is reality, so they say. We are seen as a group of people who enable our customers [individual or corporate] to legally avoid paying income tax.
No matter how well we tell our story and what we do for the world, until we show our tax structure includes a low tax rate on income, the perception will remain the same.
The real problem is not that we are a low tax jurisdiction, but because we have no tax on net profits. How we tackle this problem is very delicate. Maybe a solution would be to introduce a very low tax on net income for both the local and international customers.
So let’s stop being sanctimonious and fix the problem once and for all, my fellow Bermudians.
- David Tavares
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Bermuda has a very efficient tax system. The Americans will not institute a tax system similar to ours because it works. Accountants know how to make net income nearly zero – you will get no tax. The problem is not tax, the problem is expense. Until the U.S. stops waging wars, that their citizens refuse to pay for, they will never have sufficient tax income. And until Bermuda reduces the civil service we will never have enough tax to pay for them.
I agree with 80% of what you’ve said. But I’m not sure your approach and those who like what you’ve said really helps to solve our perception of being a “Tax Haven”.
As I have stated, this is a delicate problem. One that can be easily resolved with everyone at the table cooperating. After all, a spoke’s person in our international business community has already put the issue of income tax on the table.
Oh, by the way, wasn’t the war of independence all about refusal to pay King George’s taxes?
This is a very good point. What the Panama Papers coverage is telling the world is “don’t confuse me with the facts”. Whilst our tax system is very simple to operate it is difficult to explain to a world coming from a lens of income tax on profits (corporate and personal). We need to stop needing to have the debate. Let’s restructure some of our tax revenues from consumption and employment taxes to income and corporate profits. If we do it right the $ need not change much if at all.
David. Your article is good but the opening title and closing line are unnecessarily offensive. I am very impressed with the way the BDA are taking a new, proactive and articulate approach to extolling the island’s virtues. This will take time to take hold, but we can already see it is being more effective than anything we’ve done before. This isn’t sanctimony, this is a necessity.
Your point about tax is valid. I believe the Ministry of Finance should reclassify Payroll Tax and simply call it income tax. As for as corporate tax (capital gains and withholding) this is a lot more thorny. The amount of tax required to not be deemed “nominal” in the eyes of the Goliaths, is excessive for our type of jurisdiction. A nominal tax will not be sufficient to stop the attacks. Therefore the only route realistically available for Bermuda is the education, lobbying, compliance and transparency route that helps differentiate Bermuda from the rest.
Ron. I agree, but it was meant to be provocative! Once we get past the initial reaction, maybe we can get this behind us once and for all.
I disagree Ron.
The truth is a bitch.
And so is reality.
We are all not as fortunate as you.
Shalom.
You want us to bow down to overseas political vote bagging?
Shameful.
WTH are you not beating up on Delaware !
Do you not understand how the world works?
What you’ll find is many of the Bermudian Multi-national Companies do pay millions of dollars of tax on their corporate income in the taxable locations.
They also pay withholding tax on distributions to the Bermuda company
They also pay FET on premium transfers.
They pay US and other jurisdiction law firms, claims
They also provide capital for investment in US and other Countries worldwide.
They pay regulators fees, auditors fees and local state and federal taxes. They pay SEC fees, banking fees.
They pay the Value Added taxes on goods too.
Companies pay employer taxes, and employee taxes (in some cases) , government taxes.
Companies pay taxes…the myth portrayed by these overseas politician is scurrilous, cheap and incorrect. Why don’t we open up their taxes and look at what they have claimed for to reduce their tax burden. anything less than 100% of the tax rate for their gross income and they are guilty of avoiding tax within the guidelines of the law just like the people they bash.
Note: avoiding tax, is not illegal…evading tax is illegal and Tax evaders need to be brought to justice !
good article, balanced and rational…..now can you just tell us who the heck are the Gucci Bags people
Putting a system of low taxes in place will be no different. We will still be criticized as a tax haven because it doesn’t match other countries’ tax system and it’s in their interests to criticize us. We continue to jump through every hoop they put in place but we’re still deemed a tax haven. It’s nothing more than the big countries trying to dictate to other, smaller, countries. It comes to a point where we have to say enough-we run our country and they run theirs.
Isn’t that what payroll tax is supposed to be? Forgive my ignorance
I say take out a full page ad in the N.Y. Times explaining Bermuda’s tax position. Might want to include a similar ad in the Wall St. Journal.
You are talking about the thin end of the wedge.
” Double Dip ” taxation in this country is crippling the average working man including our seniors.
Our Political leaders would not survive one day, if they had to endure the hardship of the average working man, frankly, I do not know how our people survive on watered down chicken soup.
We did not dig the hole . We did not create the national debt ,the Government did ! Why are we having to pay for the mistakes of others ?
Because you keep voting for the same people.
That does does a lot sense, However voting for another does not change the situation.
Establishing a “very low income tax” will NOT “fix the problem once and for all”; not even close. It would do more harm than good.
” Silence is golden”!
” Hold your cards close”!