Bermuda accuses critics of ‘a lack of respect’ over transparency

By added on 07/12/2015

Campaigners attack offshore centre for support of tax dodging, corruption and terrorist financing, reports the Financial Times.

Bermuda has hit back against its critics, claiming that the financial centre is the victim of an “irresistible urge to stereotype” the British overseas territories.

Bob Richards, finance minister, mounted a trenchant defence of Bermuda’s probity even as campaigners in London attacked the offshore centre for “their support for tax dodging, international corruption, terrorist financing and money laundering”.

Bermuda, off the eastern coast of North America, is the richest of the overseas territories and the third largest reinsurance centre in the world.

Mr Richards said there was “a huge amount of ignorance” about Bermuda, which still faced political risk from a “fairly hostile world”. The territory also has “uncomfortably high” debts and its six-and-a-half-year long recession was declared over only in June.

But in an interview with the Financial Times, he said the biggest threats it faced had receded.

Last week, Bermuda resisted pressure from the UK government to publish details of who owns the companies registered in the jurisdiction, describing it as an attempt “to solve a problem that does not exist”.

It accused critics of demonstrating “a lack of respect towards the transparency and regulatory standards Bermuda has upheld, arguably unsurpassed, for many decades”.

A week earlier, it learnt that the regulatory standards of its reinsurance industry had met the requirements of the EU’s new solvency directive. The decision means its insurers will not be disadvantaged when competing for business in the EU.

Mr Richards thinks the new solvency regulations could require reinsurers to bring senior executives back to Bermuda. He hopes it will reverse the effects of the financial crisis, which eroded confidence in Bermuda and led companies to relocate some of their staff.

The favourable decision follows extensive lobbying by Mr Richards who made several trips to Brussels to convince officials and parliamentarians that Bermuda had high standards of co-operation and transparency.

A setback arose when Bermuda was featured in a controversial tax haven blacklist drawn up by the European Commission in June. It showed all the jurisdictions that were deemed unco-operative by at least 10 member states, although the lists have since been updated and Bermuda is now cited by eight countries.

Bermuda attacked the original list as “unjustified and baseless” and it found support from the Paris-based Organisation for Economic Co-operation and Development.

The Tax Justice Network, a campaign group, also criticised the commission’s list for lacking objectivity. Its “financial secrecy index” put Bermuda in 34th place in its league table of the most secretive jurisdictions. The US was in third place and the UK was in 15th place.

Bermuda remains vulnerable over its central role in corporate tax planning after it emerged that US multinationals such as Google were moving billions of dollars of lightly taxed profits to the islands. In October, leading countries promised to adopt new rules aimed at tackling “base erosion and profit shifting” that would stop multinationals routing profits to tax havens.

But Mr Richards said he was sceptical about the crackdown. He said: “I just don’t see corporate American lying down and getting nailed with billions of dollars of taxes.”

He said he particularly disliked allegations that US multinationals held a trillion dollars in offshore centres such as Bermuda. He said: “The money is not in Bermuda. It is in the money system of countries that accuse Bermuda of spiriting it away.”

“I am in a wait-and-see mode on the simple premise that you are talking about the most economically powerful entities on earth that can afford to hire the best lawyers. I don’t think it is over yet.”