Column: Bermuda Is Unique, Not A Tax Haven
[Opinion column written by Larry Burchall]
Like a broken clock that tells the correct time twice a day, the giants in the world climb down their beanstalks and go hunting for John because they believe that John, not Jack, stole their hen that lays golden eggs.
Happening again now. Global giant Oxfam is accusing Bermuda of being nothing but a tax haven, and calls Bermuda the worst tax haven.
Bermuda says that it is not a tax haven. Bermuda says that Bermuda is a low tax jurisdiction that does legitimate business across the globe.
Bermuda is correct. Take just three items.
First – Bermuda supplies about 35% of insurance power Lloyd’s of London’s total insurance capability. According to the Bermuda Development Agency, Bermuda has paid out multi-billions in settling past Insurance claims, all of which have originated from foreign countries.
A short fourteen year payout listing shows this:
- 9% of the World Trade Centre 9/11 overall claims – 2001 – USA
- 62% of claims for the UK’s Buncefield oil-terminal fires – 2005 – UK
- $22 billion to rebuild the US Gulf coast after Hurricanes Katrina, Rita and Wilma – 2005 – USA
- Over half of reported liabilities from the New Zealand earthquake – 2010 – NZ
- 20% of recent UK flood losses – 2015 – UK.
- 25% of US medical-liability re/insurance – USA – forever?
The 30 or so Insurance and Re-Insurance companies who are based in Bermuda, who actually sell their products from their Bermuda, who have a large personnel count in Bermuda, and who manage huge investment portfolios from their Bermuda base, are legitimate businesses that declare their profits in Bermuda’s low tax jurisdictions and on NYSE and other stock exchanges.
These Bermuda-based Insurance and Re-Insurance companies are completely open about that. No sneaky hiding of their accounts.
In fact, these Bermuda-based companies are far more open and transparent about where their money comes from than President-elect Donald J Trump who seems to be a unique one-man ‘tax haven’. [OMG! Will Trump tweet me tonight?]
Second – Tiny little Bermuda, just 13,000 acres, with a 2015 ResPop around 61,700 provides employment for about 170 actuaries. Bermuda’s 13,000 acres could fit inside a cattle ranch or corn farm somewhere in ‘boondock’ USA.
Bermuda has a unique economy. For about the last six years, I’ve been writing about Bermuda’s uniqueness. I have always highlighted that uniqueness. That tiny Bermuda has one actuary for every 76 acres should show and tell the whole world that Bermuda is a unique business centre. What I usually describe as a Business Park.
Third – Apart from those easy to see and understand rock-solid facts, Bermuda-based Insurance and Re-Insurance companies also provide employment for about 500,000 other people spread across the globe.
The truth is that Business Park Bermuda is in the business of:
- a. selling Insurance [direct insurance],
- b. backing other Insurers who have sold policies and who now seek back-up capacity [re-insurance]
- c. investing and safe-guarding the money paid in as insurance or re-insurance premiums
- d. settling insurance claims by paying out billions and billions of dollars for all legitimate claims.
Bermuda is not in the business of hiding money. Bermuda employs money and does so openly.
That there are no direct taxes levied by the Government of Bermuda stems from the original 1966 legislation that declared 50 years ago, that these ‘Exempt Companies’ would not pay taxes on their corporate profits.
That was the 1966 agreement. That 1966 agreement was renewed in November 2011 and extended to 2035. So ‘Exempt Companies’, now more precisely identified as Insurance and Re-Insurance companies, still have that agreement. The companies do pay annual licence fees and they pay Payroll Tax on the salaries that they pay.
Is Bermuda a tax haven where shady business men go to hide their money, or is Bermuda a low tax jurisdiction where businesses operate in a low tax environment?
Low tax? Bermuda is. Tax haven? Bermuda is not.
If you want to find ‘tax havens’ go further south, or, indeed, go north to the City of London in the UK. The ‘Panama Papers’ described that ‘City’ as one of the top ten tax havens in the world. In fact, UK was 10th. Bermuda did not even make the top twenty.
Oxfam are being naughty and that’s not ‘nice’.
- Larry Burchall
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Once again, in his clear rebuttal, Larry Burchall has exposed the fallacies of our attackers stuck in quick sand.
Larry for Min of Fin
You are joking right? The PLP would never have him because he supports IB and boosting the population (perfectly sensible but at odds with the PLP electorate. The OBA would never have him because he is so anti pathways to status and a PLP supporter.
Great article!
Well said and very clear. Ross Webber, Bob Richards and Larry Burchall have called it right. Trouble is, they don’t need to tell us – we already know. We need to get this more onto the world stage and call out Oxfam in a way that hurts them. Criticism is fine, incorrect facts are not.
Very good, love it, and spot on.
Tax avoidance- acceptable. Tax evasion- not acceptable.
Tax haven- not acceptable. Low tax jurisdiction- acceptable. Its all in the lingua, I suppose.
Untaxed corporate profits, sounds like heaven(haven) for corporations. Taxed payrolls and license fees are the paltry tradeoff.
Tax avoidance is a common business “park” reality. Most do it.. Old news. Like Lar said, the City is a top ten haven so the spotlight is being misplaced on our Isle.
Bermy, like a silvatech, protects and insulates corporate profits. Non-issue, as numerous others legally avoid taxation too. Just MEDIA noise, I guess somebody’s got to take the blame. Sleight of hand, sleight of lingua, sleight of MEDIA.
More propaganda from the Russian influence.
Oxfam that is.
Burchall is spot on.
This article pulls together the key points that many of our business leaders have said. However, the debate needs to go further. It is naïve to say that Bermuda supplies the reinsurance capacity that it does in a way that implies that if it wasn’t for Bermuda that capacity would not exist. Of course it would, and that is precisely the reason why Bermuda receives the pressure it does – other countries are trying to take this business from Bermuda for the benefit of their own economies. This article seems to imply that our reinsurance industry is a great natural resource discovered in Bermuda and being distributed globally, the reality is very different.
So your stock dropped.
P*** off.
Terry, thank you for your valuable contribution to this debate. It is much appreciated.
“…Bermuda supplies the reinsurance capacity that it does in a way that implies that if it wasn’t for Bermuda that capacity would not exist. Of course it would, and that is precisely the reason why Bermuda receives the pressure it does – other countries are trying to take this business from Bermuda for the benefit of their own economies.”
True.
It’s a point that I understand all too well. It informs and drives much of what I write about when writing about Bermuda’s economy.
Fact that is so clear to me? We – Bermudians – have to fight to retain what we have had, and now simultaneously fight to increase/enlarge what we now have.
I have long recognized that Bermuda is fighting – or needs to fight – a two front war. Something that even Sun Tzu warned against all of 2,500 years ago.
But that’s the only way that tiny isolated Bermuda will survive and re-prosper.
Larry Burchall
Thanks Larry, I couldn’t agree more!
In my humble opinion Bermuda offers way more than just a favorable tax regime when compared with other financial centers. In fact I believe many of the large insurance/reinsurance companies view the low tax environment as a negative for them. They do not like the pressure exerted on so called ‘tax havens’ because it harms their businesses through negative public perception.
I do not believe it is fair, or wise, to try to deflect criticism elsewhere as a form of defense, whether it be to our neighbors in the south or London. Those jurisdictions have their ‘Sovereign right’ to impose a tax regime that is appropriate to the financial security that they aspire to (I might refer to this in the context of Bermuda later…)
Bermuda has built up an enviable infrastructure and ecosystem for insurance/reinsurance companies to thrive. We have a regulatory environment that balances rigor with pragmatism and that is hard to achieve. Maintaining this environment is absolutely key, but it cannot be ignored that Bermuda’s ‘model’ is becoming outdated…
While it’s great for Bermuda to boast the statistics it does about the capacity it provides, my concern is that just having the companies and capital here is not sustainable for Bermuda. Our tax system is consumption based. It served us well in the past, but with ever increasing globalization and advances in technology there is less and less need for those companies to have large staff numbers in Bermuda – That is not good for Bermuda and it is a significant contributing factor (albeit not the only factor) in Bermuda’s increasing debt problem.
I genuinely believe now is the time that Bermuda should be looking ahead to the future and creating a new environment for business that serves the needs that we know our resident companies will face. I believe that should entail new corporate taxes. As I said earlier I believe that the majority of the insurers/reinsurers would be supportive of such a move, but it is important to stress that it should not be done to appease Bermuda’s critics, but instead to maintain our competitive edge.
I also think it would go along way to ensuring Bermuda’s fiscal health and sustainability. This is good for everyone, not least our resident companies who require a stable economy to operate.
I also think it would enable us to become more competitive from a cost standpoint by enabling us to remove the emphasis on payroll tax, which given the increases over the years has served to promote the ‘on shoring’ of human capital from our resident companies (some of the 500,000 jobs you referred to).
This is not a criticism of your article, but further elaboration of my opinion that the debate needs to go much further. I highly respect your opinion columns and I hope you can take an active role in positioning us to prosper in the long term.
Trouble is Larry the average PLP supporter is as against IB as they are the America’s cup. I Rolfe Commissiong has already said the PLP will be going for independence from Britain in their next term. This is not going to be a positive step for retaining the IB business.
Great post
This is all true, but Oxfam is targeting donors who give to people like Bernie Sanders, who assume:
- Corporate Tax is Good and Helps the Poor
- The Rich Stay Rich By Hiding Their Money Somewhere to Evade Tax
So Oxfam publishes things that reinforce those beliefs, irrespective of the facts. They don’t distinguish between the Bermuda and Panama business models, because their donors don’t have that level of sophistication.
Bermuda and all the offshore jurisdictions need to stop seeing themselves as rivals and start thinking as components of an industry threatened with extinction. They need to work together and spend millions on public relations to change the basic assumptions fuelling anti-offshore sentiment among Sanders types.
I don’t think the Bermuda based re-insurers are the problem Mr. Burchall – it’s the very large corporate entities that are are here in name only for the express purpose of ‘booking’ global profits. Not to mention the huge trust business to service the international tax exile citizens. A service tax should be instituted immediately on the various local providers that have enjoyed this business for decades. Oh my did I say that?