Read my lips: Bermuda is NOT a tax haven

Saul on the road to Damascus. Archimedes in the bath. Whether we realized it or not, Bermuda had it a few days ago when David Cameron sent that missive to the British Dependent Overseas Territories over UK tax issues. 

Responding to UK (and USA) political noise about major companies, Amazon, Apple, Google, Starbucks, etc… making massive profits but paying miniscule taxes; David Cameron summoned the last twelve particles of the British Empire to London for what he called “talks” and discussions on their national tax policies.

The trio of Cameron, Obama, and that French guy are singing the same tune and blaming the same process. They’re trying to form a quartet by roping in the maverick from Moscow. All in an effort to get a few global corporations to pay more taxes to their governments.

They’re entitled to do that. Equally, the corporations are entitled to minimize their tax obligations.

Bermuda finds itself lumped in with Cayman’s, BVI, Turks & Caicos, Jersey, Guernsey, Gibraltar, Anguilla, Vanuatu, and the other tail-ends of Queen Victoria’s Empire. Bermuda is now being treated as if it was a tax haven where Brits, Yanks, Frenchmen, Russians, and all sorts of other people stash their loot solely for the purpose of avoiding HRMC, the IRS and whatever the French and Russians call their tax collectors.

Bermuda is not a tax haven. It never was. Bermuda is an Insurance centre.

Bermuda’s now large and successful International Business was set up under Bermuda legislation put in place in 1966 — the year that David Cameron was born. That Bermuda legislation provided that companies basing in Bermuda must pay substantial licences and fees to Bermuda but would be ‘exempt’ from the payment of any taxes on their global corporate profits.  The legislation also prevented them from doing business within Bermuda. All their business had to be transacted with offshore entities.

Policies and contracts are written under Bermuda law. Disputes are handled in Bermuda’s specially set up ‘Supreme Courts’ where a dedicated trio of experienced senior judges specialize in ‘commercial cases’. 

By 1996, the small businesses of 1966 had invented global ‘captive insurance’ and had grown into ‘re-insurance’. By 1996, Bermuda-based insurance companies were rivalling the London insurance market. From 2001 on, the Bermuda Insurance market was second only to London.

The Insurance and Re-Insurance companies operating from Bermuda had changed Bermuda.  By 2012, licences and fees and direct taxes from these companies were providing 20% of all the Bermuda Government’s revenue. 

Companies such as ACE, XL, Partner-Re, etc… were publicly held, traded on major exchanges, and paid taxes to the US and other governments. These were not shell operations. These were companies with massive personnel and infrastructure footprints in Bermuda. 

We pay out

In full context, in 2012, the 13,120 acre island nation of Bermuda at 31n64w, mid-Atlantic Ocean had a total population of about 62,000 persons which is smaller than the populations of thousands of UK (and USA and French) towns.

However in 2012, this small Mid-Atlantic town was home to 152 Actuaries, 312 Lawyers, 379 Underwriters, 1,230 Accountants, and 3 shoe repairers. That professional mix indicates a working insurance platform. 

Actuaries and Underwriters can only ply their highly specialized skills in an insurance environment. In a tax haven, Actuaries and insurance Underwriters would be expensively useless appendages. 

Bermuda was the first to pay claims after Al Qaeda flattened New York’s Twin Towers. Bermuda paid up fast for Hurricane Katrina, and the more recent storm damage at Sandy Hook. Bermuda is ready to start paying claims for the June floods in central Europe. Between 2000 and 2012, insurance payouts from Bermuda to the US exceeded $35 billion.  

Bermuda is a payout centre. Not a tax hidey-hole. When ENRON collapsed, investigators uncovered 692 ENRON shell operations in Caymans, 119 in Turks & Caicos, and 43 in Mauritius. In Bermuda there were eight. 

Through a combination of its sound legislation and rigorous pre-examination in a Know Your Customer process, Bermuda has largely avoided being used as a major base for companies and operations that consist only of a nameplate on a door and a mailing address in Bermuda.

Overall, Bermuda’s modus operandi and its core global business defines Bermuda as distinctively different from the ‘tax havens’ currently being targeted by the G8.  

With the G8’s massive array of missiles aimed at tiny Bermuda, it’s decision time. Does Bermuda run with the tax haven BDOT particles; or does Bermuda blast out of orbit and ensure that it is defined as and continues to work as a successful insurance base?  

It may be a nice ego trip for Premier Cannonier to be seen as the Leader of the BDOT group; but is that leadership and consequential connection to that group in Bermuda’s best national and strategic interest?

No. It is not. n