The introduction of tax reform measures is one of the most important items that should be on the Agenda for any political party vying to win this upcoming election. Tax reform is critical to Bermuda’s economic recovery and clearly the One Bermuda Alliance is afraid of the word “tax”.
One of the reasons that our buses, roads, ferries, schools and airport are falling apart is because we do not raise enough money from payroll tax to run our country. Yet in other countries such as the United States, Canada, Britain, Japan and Australia, there is a capital gains tax on wealthy individuals, trusts and private companies that own multiple commercial and residential properties.
The income derived from investment in real estate should be taxed in Bermuda just like it is in most other Western and European countries. Which, by the way, is a weighted average of 23.2 per cent for member countries in the Organisation for Economic Co-operation and Development.
The Progressive Labour Party appears to be the political party more likely to include tax reform in its political platform for the upcoming General Election to be held on July 18. No doubt about it, the OBA scored an amazing feat with bringing the 35th America’s Cup to Bermuda, refinancing the national debt when the interest rate was low and slowly reducing the Civil Service. On the other hand, it failed to deliver on promises to produce 2,000 jobs, to tender government projects, to be transparent, to listen to the people and to resuscitate the economy. In fact, the economy up until May this year has been anaemic since the OBA won 19 of the 36 seats in Parliament on December 17, 2012.
Not only does it appear that the PLP would consider implementing a capital gains tax, but it is to be hoped it will reconsider offering Bermuda has a tax-free haven.
It would be beneficial not only to Bermuda, but also to our international business, to consider corporate tax reform and to phase out the tax assurance certificate with five years’ notice. Current holders of the tax assurance certificate should continue to enjoy the benefit through to 2035, as promised by Bermuda governments both past and present. However, it is my hope that the next government drops the TAC for newly incorporated exempted businesses after five years and replaces it with a certificate requiring a minimum of 1 per cent to 2 per cent tax on shareholder dividends.
In October 2015, Reuters reported that 500 of the largest American companies hold more than $2.1 trillion in accumulated profits offshore. This information came from Citizens for Tax Justice, and the US Public Interest Research Group Education Fund used companies’ own filings to produce the report that found 75 per cent of the firms on the Fortune 500 list operate subsidiaries in countries such as Bermuda, Ireland, Luxembourg and the Netherlands. The European Union has estimated that it is losing $1.3 trillion a year from tax avoidance schemes of multinationals.
The Trump Administration has already discussed lowering the corporate tax from 35 per cent to 15 per cent to encourage American corporations to come back onshore. There is constant and well-founded criticism from countries in Europe, Latin America and North America regarding the use of inversions by companies incorporated in offshore jurisdictions. The OECD has beaten us into compliance-gathering robots and, finally, the G20 Focus on Beneficial Ownership Registers, discussed on October 4, 2016 in Brussels, should send clear signals that international business needs to pay some form of tax to quash the constant and well-founded barrage of criticism. Apparently, John Charman, chief executive of Endurance Specialty Holdings. is one of the few visionaries in international business to publicly support some taxation.
The OBA comes across as being too weak to negotiate a seamless adaptation from no corporate tax to some corporate tax. Perhaps because a large percentage of its supporter base is unable to untangle their business interests from the interests of what is better for Bermuda and for the majority of its citizens.
The PLP has voiced its appetite in the past about tax reform and I hope its political platform will elaborate more on this incredibly important economic opportunity to stimulate the economy, pay down our debt and invest in our infrastructure.
• Cheryl Pooley is a social commentator and three-times former parliamentary candidate