Column: Biden’s Comments, Business & More

May 25, 2021 | 0 Comments

[Opinion column written by Vic Ball]

US President Joe Biden recently attacked Bermuda in his first speech at the joint session of Congress on April 28, 2021. He is now added to the long list of US Presidents who have criticized our island for sheltering US corporations from paying their fair share of federal taxes to the American treasury.

His exact words were, “A lot of companies also evade taxes through tax havens in Switzerland and Bermuda and the Cayman Islands. And they benefit from tax loopholes and deductions for offshoring jobs and shifting profits overseas. It’s not right”.

President Biden mentioned Bermuda during his Presidential Address to Congress in April

It is interesting that President Biden used the word “evade”. If there is proof that US companies are evading paying their rightful share of taxes then he is absolutely correct and those companies should be prosecuted to the fullest extent of the law. However, there is a clear and legal distinction between tax evasion and tax sheltering. US citizens and corporations routinely and legally shelter their income to avoid paying taxes.

A tax shelter is defined as a vehicle used by individuals or organizations to minimize or decrease their taxable incomes and, therefore, tax liability. Tax shelters are legal and can range from investments or investment accounts that provide favorable tax treatment, to activities or transactions that lower taxable income through deductions or credits. A tax shelter is a legal and legitimate tax minimization strategy and should not be confused with the illegal practice of tax evasion.

President Biden was the former Senator of Delaware from 1973 – 2009 when he became Vice President of the US. Delaware is one of the top US states that provides tax sheltering structures for US corporations and individuals. Delaware offers numerous incentives for entities to incorporate there with the express purpose of sheltering income and avoiding paying US taxes.

Former OBA Finance Minister Bob Richards did an excellent job of defending Bermuda from this latest attack by proving our benefit not only to the US but also globally. He highlighted the overwhelming legitimacy of our International Business sector and addressed the loopholes in our laws that allow international corporations to greatly benefit, while there is minimal advantage or benefit to Bermuda. Google was cited as a company that paid $1000 to $25,000 annually to Bermuda while they benefitted substantially by taking advantage of the Double Irish Sandwich tax structure, which I might add is very much legal.

Mr. Richards urged us to do a better job of taking care of our reputation because we have had recent attacks from European Governments as well. Therefore, we need to avoid these damning relationships. He urged that we should be promoting the verifiable legitimate operations here that provide significant value to the global economy, benefitting numerous nations and providing hundreds of thousands of jobs worldwide.

I would also like to add that Bermuda must get off the defensive on this issue. We have been too apologetic for our IB success. This stance encourages more attacks from countries that have an interest in disagreeing with our business model. The undeniable fact is that the IB sector is in Bermuda because it makes business sense for them to be located here.

Bermuda is like all other countries, especially the US. We offer incentives to attract foreign investors. We are a tiny island in the middle of the Atlantic with a small population. It is ideal for us to create a tax structure that is attractive to encourage business to set up here. Similarly, the US has a long history of gaining access lower-cost labor and resources by setting up operations in other countries.

We have world class infrastructure, a competitive standard of living and human capital. Our regulatory regime is comprehensive, we have political stability and we have a judicial system with many years of experience in settling commercial disputes. In addition, we have the highest courts in the UK at our disposal for the appeals process, if required. We are a testament to free market capitalism.

We have created an enterprise where Bermudians can benefit. We provide the vehicle for a reciprocal relationship that allows a win-win solution. We need to stop being apologetic for this. We are not breaking any international laws so we have nothing to be ashamed of or hide from. Therefore, it is grossly unfair that the giant nations of the world hurl aspersions at us.

They are free to take whatever measures they desire to make their countries attractive and compatible, just as we are. The US raises or lowers its corporate tax rate from time to time and we should be afforded the same rights including to have none at all, free of allegations, accusations and threats.

Why should we adopt a tax structure that will be against our national interest? Why should we not continue to uphold a tax structure that works to the advantage of our nation and our people?

Bermuda requires leadership that is unwavering on this point. Our detractors should not hide behind the vague accusations of “tax haven” with threats and intimidation. Of course, there should also be no delusions about our disadvantage of standing up to goliath countries like the US. It is certainly in our interest to maintain a healthy relationship with them as they are our largest trading partner through IB and tourism.

However, our relationship should be built on mutual respect no matter how tiny we are or how large they are. Where there are legitimate concerns, they should be acknowledged, addressed and corrected. Should we live on our knees in fear because our model is successful?

These accusations, allegations and threats have the ability to unjustly undermine the stability of our economy. They are a violation of our nation and are contrary to the allegiance and relationships we have developed with the nations making them. Therefore, we should cease allowing ourselves to be bullied and demand an apology.

Although it is unlikely that an apology will come from anyone in the US for calling Bermuda a country that harbors tax evaders, I would also encourage our Government to make it a priority to go to Washington to directly educate President Biden’s advisors. In addition, we should use our friends and resources in the Democratic Party to support our International Business sector and advocate for the Bermuda brand especially now that our economy is suffering enormously from the effects of the global pandemic.

- Vic Ball

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