Romney under fire for tax avoidance in Bermuda

WEDNESDAY, JAN. 25: Multi-millionaire US presidential hopeful Mitt Romney used Bermuda as a financial base, according to tax documents released by his campaign team.

And the issue — highlighted locally by bernews.com — has focused fresh attention on whether US citizens should be allowed to exploit legal loopholes to avoid paying tax at home.

Mr Romney – a former Massachusetts governor and former head of private equity firm Bain Capital – was tipped as front runner to be the Republican candidate to take on President Barack Obama later this year.

But a row over his legal tax avoidance techniques used when he headed Bain Capital in the 1980s and 1990s has threatened to derail his bid.

Writing on website Politico, Dietlind Lerner and EJ Fagan of the Task Force on Financial Integrity and Economic Development, said: “Bain was in total accordance with the law by using these offshore arrangements. It was just taking advantage of a serious problem in our tax code, which allows well-off companies and individuals to shift money out of the economy to avoid paying their fair share of tax.

“It’s difficult even to estimate exactly how much tax money the US government is deprived of each year through what is now legal tax avoidance.

“Companies don’t have to report money invested in offshore vehicles. The use of these vehicles is now common in the practice in the financial services industry.”

The pair added: “As international financial crises threaten governments in Europe and Africa, and Occupy Wall Street protests continue in cities around the country the measure of a future president should not be that he took advantage of a great business deal.

Harmful

“Rather, it should that, if elected, he could be trusted to put an end to this entire process of legally-sanctioned tax avoidance which is so harmful to our country.”

Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.

According to the Los Angeles Times, Bain Capital, under Romney’s leadership, set up Sankaty High Yield Asset Investors Ltd in Bermuda. That meant that Bain Capital could legally avoid US corporate tax.

Mr Romney also had a Swiss account, which was closed in 2010 as well as other overseas accounts and financial accounts in the Cayman Islands.

According to the Boston Globe, Mr Romney and his wife Ann, who are thought to be worth as much as $250 million, paid $6.2 million in taxes on $42 million in income over the 2010 and 2011 tax years.

The rate of tax – just under 14 per cent in 2010 – is paid on income derived mostly from investments, which are taxed at a lower rate than earned income in the US.

Mr Romney also gave $3 million in charity donations in 2010, much of them to the Mormon Church, of which he is a member.

He told the Wall Street Journal: “I pay all the taxes that are legally required, not a dollar more. I’m proud of the fact I pay a lot of taxes.”