Bermuda wants to leave behind its reputation as a tax haven to become a Fintech hub. In an interview with EURACTIV.com, the premier of the UK’s overseas territory, David Burt, said the island could come out of the EU’s ‘grey list’ of tax havens early next year. But he criticised a global minimum tax and praised tax competition among countries.
What arguments do you have to convince people about the shift from a tax haven to become a financial innovation hub?
We have already made the shift. It has happened over an extended period of time. The perfect example is the numerous insurance companies Bermuda has. They are there because of our superior regulatory environment. We have a single integrated financial services regulator, the Bermuda Monetary Authority, that is respected around the world. In addition, Bermuda has a very long history of being an excellent place to raise capital, an excellent place to deploy capital, but a very terrible place to hide capital. There have been numerous exposes, and you would struggle to find illegal activity tied to Bermuda.
You still remain on the EU’s grey list of tax havens. There is an outstanding issue related to collective investment funds. What efforts are you taking?
We have tabled legislation in our Assembly on Friday 29 November. I expect that it will be passed before the end of the year. There have been positive engagements between Bermuda and the EU on the issue of collective investment vehicles or funds. It’s not a very big part of what we do in Bermuda. We have had a long history of cooperation with the EU institutions. And we will continue to demonstrate this. We have been early adopters of international tax treaties on the exchange of information. We have 114 tax treaty partners, we signed numerous different bilateral treaties dealing with those particular things. And we do not let just any and anyone into our country. You have to pass strict checks before you are able to set up a company. We have beneficial ownership owner of a company in Bermuda.
There is an international effort, led by the OECD, to fight against tax evasion and tax erosion. Do you think that it is high time for such an initiative?
My view on a minimum tax is that it seems anti-competitive overall. Itis important that policymakers approach these type of things, recognizing the problem that you are trying to solve. When it comes to the Base Erosion and Profit Shifting (BEPS) initiative, we are members of the Global Forum, and we will continue to be engaged in that process. But as I said, it is important that changes may have unintended consequences, and could lead to a slowdown in investment and other things. The problem that is trying to be solved is that income generated is not being appropriately taxed. I don’t believe that a global minimum tax or corporate minimum tax is the correct way to go. It makes sense that people had different systems. That is the basis of fundamental competition and markets. It is not, as though, we have no taxes in Bermuda. We have a lot of taxes. Our taxation system is a different one. Of course, you should tackle harmful tax competition, as the OECD has done. But I do not believe that tax competition on itself is harmful. It has been demonstrated is good for the global economy. It makes sure that the global economy works better.
But precisely one of the issues that BEPS tries to address is unfair tax competition at the global level.
I find it hard to say unfair tax competition. Again, it goes back to what is the problem. Policymakers need to be very clear to define the problem we are trying to solve, and not to make the problem worse by attempting to take a sledgehammer to crack it.
Do you believe the EU has been too strict in dealing with unfair tax competition?
I don’t think it’s a question of whether the EU has been strict or not. What I am saying is that we should define unfair tax competition. When we start talking about global tax harmonisation, I think that is a little bit dangerous because if you don’t have competition, things would be less efficient, and that could cause harm to the global economy.
As the most populated overseas territory, what is your take on Brexit?
Since the referendum vote in 2016, Bermuda has been preparing for the UK’s eventual withdrawal from the EU. That is a reason why we established a Brussels office, to make sure that we had a presence in a very important trading partner. We remain engaged in the European market and will remain engaged after Brexit. We do not know whether Brexit will happen, what form of Brexit, what it will look like, or what the relationship between the UK and the EU may be. But we know that the future relationship will be one of mutual respect.
Given that you are the only jurisdiction, together with Switzerland, with equivalence regime (recognition of financial frameworks) both with the EU and the US, do you have any advice for London for the future relationship talks?
I will save any advice that I have for London whatsoever. I know that the Solvency II Directive (negotiations for equivalence recognition in insurance) took us six years to achieve. I wish them the best of luck.
[Edited by Zoran Radosavljevci]