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Deserved or not, Bermuda's reputation as a 'tax haven' has grown. Even Pope Benedict XVl is preaching against us. Right or wrong, in the psyches of President Barack Obama and his supporting menagerie of Democratic Senators and Congressmen, and four hundred years on from those ancient 15th Century Spanish mariners, Bermuda is once again an 'isle of devils' - tax-dodging devils. How can Bermuda deal with that? In early 2009, planeloads of Bermudian politicians can fly to Washington, D.C.; join the massive queue, and lobby, beg, pray, dine, pour wine and Black Seal into, and talk to Congressmen, Senators, and anybody else who'll listen. Or, most of them can stay in Bermuda, fix things in Bermuda, change Bermuda's tax laws, and create a new tax system. [*]

Revamp views

Much, much, more importantly though, what Bermudian politicians must do immediately is completely re-vamp their views and attitudes about the relevance and importance of International Business and its direct supporting services [IBplus] to Bermuda's economic and social well-being.

     Bermuda's politicians must tell the truth about Bermuda's national economy and the Bermuda Dollar - old or new. Tell ordinary Bermudians that, right now, 80c out of a Bermuda dollar's value exists only because of the revenue/foreign exchange earned or brought in by IBplus. Tell Bermudians that Tourism is barely managing to bring in the other 20c of value that makes up that $1. Tell this to the people.

     Tell Bermudians that Bermuda's 'construction boom' is a derivation from IBplus.  That all those nest-building "cranae towerae" on Hamilton's skyline are fed by U.S. dollars that first came through IBplus's revenue pipeline. Tell them.

     From the totality of communications and information circulating within Bermuda's community of Bermudians, there is clearly a wide lack of understanding of how Bermuda and Bermudians earn their national living. This lack of understanding is evident in statements made by Government Ministers; in statements and writings from some 'community activists' and 'opinion shapers'; in letters to the editor; in comments from street interviews; and in comments from Bermuda's coterie of 'talk show' callers.

      Before Bermuda can start taking the kind of action that it needs to take, all Bermudians must realize what is actually happening, and understand, far better than now, exactly what Bermuda can and CANNOT do.

      One of the things that Bermuda CANNOT do is operate IBplus at its existing level of activity without the help and continuing presence of thousands of non-Bermudian workers. Bermuda can certainly operate a Bermudians-only IBplus. But a Bermudians-only IBplus activity would struggle along at about 15-20 per cent of IBplus's current activity level.

    That, of course, would result in a huge drop in national revenue. That drop, in turn, would bring a consequential huge drop in the value of that 80c portion of the Bermuda dollar. That huge drop would be felt by every Bermudian.  It would result in far fewer dollars to be shared around to pay for $5 loaves of bread, $7.50 a gallon gas, $200 a month 'leckalight' bills, and existing mortgages/loans.

     Like it not, politically correct or not, even with Casinos and gambling, with four mega-ships a week at Dockyard, and with beach-bars on every beach; Tourism still won't make up the difference. Going forward - and not even beginning until well after 2010 or 2011 - Tourism may just be able to squeak back eventually to the level where it could make up a total 40c - 50c of our Bermuda dollar.

      But with a Bermuda dollar shrunken by a large reduction in IBplus, and even with a re-grown Tourism, the Bermuda dollar that finally reaches your pocket will likely only have a real world purchasing power of about 60c - 75c. That lower real value will make it much harder for you - and every other Bermudian - to pay for $5 bread, $7.50 gas, $200 'leckalight' bill, and meet your existing mortgage/loan payments.

Start thinking

Of course, in this short space, this vast and complex national matter cannot be opened, explained, and resolved. In this space, I can only hope to start a thinking process.

I hope that I've started you thinking. But, if I haven't, if you'd rather ignore it all and, instead, concentrate on what outfit you'll buy for Easter, then that's okay. Change will still happen, and you'll simply throw away any opportunity that you may have to help make positive change that can directly benefit you.

But the world will still roll on. Change will still come. And, in the future, you may or may not be better off. Probably, not better off.

 

* Tax changes can convert Bermuda into a place that is no longer a tax-free jurisdiction - an 'isle of tax-devils.' Tax-wise, Bermuda could be the same as Switzerland where there is an 8 per cent tax on corporate profits.

[See my Bermuda Sun columns of June 21, 2005 and March 22, 2006.]) Also see Taxing Issues.[[In-content Ad]]

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