stevenallen /
28 March 2019News

Bermuda’s efforts to keep off the EU blacklist

On March 12, the European Union updated its list of non-cooperative tax jurisdictions, and Bermuda once again found itself on this so-called ‘blacklist’ - a situation the government now seeks to address as premier David Burt leads a team to Europe to speak with various government tax officials.

Ten jurisdictions - including Bermuda - had agreed to modify their tax regimes to comply with rules set by the EU Code of Conduct Group in December 2017, which relate to tax transparency, fair taxation, and the commitment to anti-base erosion and profit shifting (BEPS) measures. This list of jurisdictions that had made commitments has often been referred to as the ‘grey-list’.

The other formerly grey-listed jurisdictions now back on the blacklist include Aruba, Barbados, Belize, Dominica, Fiji, the Marshall Islands, Oman, the United Arab Emirates, and Vanuatu.

In a  press conference following the announcement of the EU’s revised list, Burt expressed his wish to assure the people of Bermuda that the government does not anticipate any sanctions to be levied against the island. He also suggested in a statement to Bermuda’s House of Assembly that the EU’s placement of Bermuda on the blacklist  was a result of a “minor technical omission” in its regulations.

On March 25, the Government of Bermuda announced that Burt, along with minister of finance Curtis Dickinson would lead a team to Europe for a round of meetings aimed at laying the groundwork for removing Bermuda from the blacklist.

The team expects to meet various government and tax officials, including Robert Jenrick MP, exchequer secretary to the treasury in London and once in Brussels with Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs as well as ambassador Luminita Odobescu, permanent representative of Romania to the European Union. It will hold further discussions with tax officials in France and Germany, as well as with the leadership of the EU's Code of Conduct Group in Brussels.

"It is encouraging that EU leaders in this area have been receptive to our requests and I expect that this level of engagement will provide the ideal opportunity to make the case for Bermuda’s compliance with EU standards," says Burt.

He continues: "We have wasted no time setting about this important task. Our economic substance regime is the law of the land today and there are opportunities presented for growth in existing sectors and the creation of additional economic activity in Bermuda. Our time in Europe will see us engage with the right people who advise and make decisions on jurisdictional issues like this. We believe we have a strong case to advance and we will do so directly this week."

Blacklist background and Bermuda’s importance to the EU

In December 2017, the Council of the EU published the blacklist with the aim of cracking down on tax avoidance, and addressing deficiencies in the tax systems of non-EU jurisdictions.

In terms of the impact caused by the EU’s blacklist, there are concerns over whether reputations will be damaged or that jurisdictions could even face sanctions from the EU and its individual member states. Beyond being named, however, the jurisdictions have faced few, if any consequences from the blacklist.

Furthermore, some argue that there are inconsistencies in how the EU has curated its blacklist, particularly with jurisdictions that fall within European borders. In November 2017, Oxfam published a report, Blacklist or whitewash?, which showed that, according to the EU’s own criteria, four countries within the EU should be blacklisted but are not. These countries are Ireland, Luxembourg, the Netherlands, and Malta.

By taking aim at countries outside the EU, Oxfam suggested this step has strongly harmed the credibility of the process—with Ireland, Luxembourg and the Netherlands being among the most powerful tax havens in the world, enabling the largest corporations to pay minimal tax.

A wide range of industry groups on Bermuda including the Association of Bermuda Insurers & Reinsurers (ABIR) have pledged their support to efforts by the Bermuda government to get the country removed from the European Union’s so-called blacklist list of as quickly as possible.

John Huff, president and CEO of ABIR, suggested that while there would be no immediate or tangible impact on re/insurers in Bermuda it was important the status was changed as soon as possible and the EU recognises the importance of Bermuda’s re/insurers to the EU.

"We have every hope today's EU determination will prove temporary,” says Huff. “While ABIR understands there is no immediate tangible impact to Bermuda or its markets, we are appreciative of the Bermuda government's commitment to remedy the designation as soon as possible. There is bipartisan and industry consensus in Bermuda to meet international standards.”

Huff continues: "The Bermuda re/insurance market is a valuable partner in the EU and has paid over $72 billion to EU policyholders and cedants over the past 20 years. ABIR is confident policymakers will act in the best interests of consumers to ensure continued level-playing-field access to our market's claims-paying capital and risk-management expertise."