The Caribbean island nation of Bermuda tops major international NGO Oxfam’s list of the world’s worst corporate tax havens. In developing the list, Oxfam took a number of factors into consideration, including the practices of offering tax incentives deemed to be unproductive or unfair, a corporate tax rate set at zero or an extremely low rate, and failure to collaborate with international tax authorities to combat international tax avoidance.
Bermuda and “Profit Sharing”
In a separate report published in early 2016, Oxfam found that Bermuda was a particularly popular destination for U.S. firms seeking to engage in what is known as “profit sharing.” When companies make use of this strategy, they shift their profits from high tax jurisdictions, such as the U.S. and many European countries, to jurisdictions that have a low tax rate or a tax rate of zero. This effectively allows them to minimize their tax burdens. Oxfam reported that in 2012, U.S. firms had reported a staggering $80 billion of profit in Bermuda — well over the amount of their profits from Japan, Germany, France, and China, four of the world’s largest economies, combined.
Bermuda’s government has denied Oxfam’s accusations that it functions as a tax haven, alleging that there were significant errors in the organization’s report. “The government of Bermuda notes with surprise and disappointment statements by Oxfam concerning tax and transparency in which Bermuda has been wrongly included,” Everard Richards, Bermuda’s deputy premier and minister of finance, said a statement, pointing out that Bermuda is home to many companies who play a role in supporting the world’s poorest people.
“We have a leading role in supporting global property/catastrophe and other insurance, which directly benefits many of the ‘poorest people’ to which Oxfam refers, as well as providing employment in many economies beyond our shores, including the UK,” he added. Richards also said that Oxford overstated the presence of anonymous shell companies on the island and insisted that the country always fully cooperates with the relevant international authorities to address international tax avoidance.
The Price of Tax Avoidance
A number of countries on the list, like Bermuda, are British Overseas Territories. This includes the Cayman Islands, the British Virgin Islands, and Jersey. Oxfam called on the British government to take action to address the issue. “Allowing our overseas territories and Crown dependencies to operate as tax havens undermines Britain’s efforts to be an outward-facing, responsible member of the international community,” said Ana Arendar, Oxfam’s head of inequality. “It’s time to end this embarrassing contradiction in our own backyard.”
Oxfam argued that tax havens distort the global economy and prevent governments, particularly those in the developing world, from earning much-needed tax revenue. This, in turns, deprives citizens of public goods, like education, healthcare, and social services. “Tax dodging isn’t an abstract accounting game,” Arendar said. “The lost revenue has devastating consequences for the world’s poorest people who miss out on lifesaving medicines and the chance to go to school.”
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