Bermuda under EU blacklist threat, claims Richards

23-06-2017

Bermuda is facing an existential threat from the European Union, leaving it in danger of being scapegoated and possibly blacklisted as an alleged tax haven that is harmful to the global economy, according to Bermuda’s finance minister Bob Richards.

Richards said in a press conference on Bermuda on Thursday June 22 that the government of Bermuda received an email on June 9 from the Code of Conduct Group (CCG) in the European Union in Brussels to fill out a questionnaire.

The CCG looks at anti-abuse rules, transparency and exchange of information in the area of transfer pricing, administrative practices and the promotion of the principles of the code of conduct in non-EU countries. The code of conduct itself requires EU member states to abolish existing tax measures that constitute harmful tax competition and refrain from introducing new ones in the future.

Richards claimed that: “Bermudians should regard this Code of Conduct Group as the ‘EU Blacklist Group’. The email contained a questionnaire about the way Bermuda conducts its business internationally. The deadline for our response is July 7th. If we do not answer the questionnaire we will be deemed to be ‘non-compliant.’

“The questionnaire is designed to lead to a predetermined conclusion that Bermuda is a tax haven that is harmful to the global economy, and the EU in particular, and therefore should be placed on an economic blacklist.”

Richards pointed out that the Organisation for Economic Co-operation and Development (OECD) and the Financial Action Task Force to combat money laundering (FATF) had concluded that Bermuda is not “harmful” in its conduct or in the application of its laws in the global economy and that an earlier attempt in 2015 by the CCG to blacklist Bermuda in 2015 had been repudiated by the OECD and was dropped.

However, Richard alleged that this latest attempt has been “more cleverly constructed” and “poses a much greater threat.” He went on to state that: “We believe it constitutes a clear and present danger to our international business sector.”

He explained: “Bermuda has spent a great deal of time and money adjusting our laws, regulations and business practices to stay ahead of, or on the leading edge of, the curve as it relates to international taxation and information sharing. We have been early adopters of all the initiatives coming out of agencies that set international standards. Yet there are those out there that choose, for their own reasons, to ignore our record.

“This outside threat represents a viewpoint held by certain officials in Brussels that because Bermuda does not have corporate income taxes, we are destructive to their own tax regimes.

“However, this narrative is totally false. Bermuda does not hide beneficial ownership from tax, regulatory or law enforcement entities; Bermuda does not create structures designed to obscure where income is earned; Bermuda is not the jurisdiction of choice for hundreds of thousands of multinationals seeking to create shell corporations – other jurisdictions are. But scapegoating Bermuda plays well in some European countries for political reasons. It also assumes that Bermuda is weak and defenseless.”

Richards said that the blacklisting of Bermuda could entail severe economic penalties and/or restrictions on trade and the flow of funds, adding that: “The damage to our hard-earned global reputation could be sufficiently severe as to threaten the viability of our global insurance/reinsurance business.”

According to Richards, the government of Bermuda will “aggressively defend” the Island, although he admitted that support from its traditional friends in the UK would be lessened by the impact of Brexit, which has weakened the UK’s standing in Brussels.

Despite this Richards said that the government was are pulling together all the resources necessary to beat back this latest threat, including the Association of Bermuda Insurers and Reinsurers, the services of a London-based law firm to support Bermuda’s position and Bermudian experts within the civil service and Bermuda’s regulatory bodies.

Richards stated that the government’s first priority is to answer the questionnaire clearly and logically. “If there are biases in the questions we will point them out and propose alternatives that demonstrate our role in cooperation, transparency and reporting.

“With the questionnaire submitted by the deadline date, we will follow with a campaign enlisting the support of our contacts within the EU and elsewhere that we have built up in recent years. I am confident we will prevail.”

Bob Richards, Bermuda, European Union, Europe

Bermuda Re