Bermuda has the goal of becoming a destination for financial technology companies, but it has also made it clear that it does not want to be considered a tax haven. Bermuda has made it clear that while it will do its best to attract tech companies, it will not hide those who engage in illegal activities.
The statement came from Curtis Dickinson, the Bermuda Finance Minister, during an interview with the Financial Post. He told the interviewer that Bermuda will “rat out” those who try to use Bermuda to hide their misdeeds. Dickinson went on to emphasize that this comes down to the country’s reputation. He referred to the British Overseas Territory’s reputation as part of its “calling card.”
According to Dickinson, the country wants to start by showing that it is serious about this statement. Otherwise, he fears that people will not take Bermuda seriously.
Bermuda Operates as a Tax Haven
Despite Bermuda’s strong statements that it does not want to be a tax haven, the country acts like one. There are no taxes on capital gains, income, or corporations. This has led to a booming financial services sector in addition to the large tourism sector. The largest industry in Bermuda is insurance.
A full range of businesses and industries choose to operate in Bermuda due to the lack of taxes. Bermuda meets the strict definition of a tax haven, as a jurisdiction without taxes. However, it seems that the country wants to avoid this label due to the negative connotations associated with it, specifically those related to illegal activities.
It appears that Bermuda is improving its reputation with success. After all, the European Union removed it from its list of tax jurisdictions that are not cooperative in May. This change was due to the country’s “positive steps” and commitment to address concerns of the EU.
The Fintech Priority
There is also strong evidence that Bermuda is working to make the fintech industry a priority. The Bermuda Monetary Authority is the sole financial industry regulator on the island. Bermuda touts this agency as nimble and progressive, letting it minimize red tape and quickly respond to changing needs within the industry.
Last year, the parliament of Bermuda passed legislation that regulates firms that involve cryptocurrency. To date, Bermuda only has one licensed crypto company and has issued four permits for initial coin offerings, but many others are going through the process of following suit.
Encouraging Canadian Business Relationships
In addition to taking a strong stance on being a tax haven while attracting tech companies, Bermuda is actively trying to create business relationships between itself and Canada. In 2017, the two jurisdictions had a two-way trade volume of $2.6 billion USD.
Since Bermuda is just two and a half hours from Toronto via plane and does not charge corporate taxes, it argues it is a prime destination for an offshore presence. Bermuda was careful to indicate it does not want Canadian companies to move completely and unearth their roots. Instead, it encourages them to expand their international presence into Bermuda.
Bermuda’s hopes to boost relationships with Canada comes in response to the political volatility in the United States and the United Kingdom. Working with Canadian businesses allows the country to diversify. Bermuda feels that Canada will benefit from that instability in the U.S. and U.K. as people search for that stability.
The Canadian government should be less hesitant to encourage offshore presences in Bermuda than with other tax havens. This comes from the tax-information sharing agreement that Bermuda and Canada have had since 2011. For transparency and reputation, Bermuda also has tax-information sharing agreements with about 40 additional countries.
Although Bermuda does not want to be a tax haven, its lack of corporate, capital gains, and income tax classifies it as such. It is just important for those who want to use tax havens for unscrupulous purposes to know that Bermuda will not tolerate their misdeeds.
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