According to a list by Oxfam, a charitable organization that works to alleviate global poverty, Bermuda is the worst corporate tax haven in the world. Joining Bermuda on this list are fourteen other tax havens, which include the Cayman Islands and British Virgin Islands. But, what makes Bermuda stand out among the others noted on this list?
Creating The List
Oxfam did not take the creation of this list lightly. In order to determine the tax havens that belonged on the list, Oxfam carefully researched numerous factors, including the presence of exceptionally low or nonexistent corporate tax rates and unfair tax incentives. Oxfam also took into consideration the cooperation, or lack of cooperation, of these tax havens in regards to international regulations designed to combat tax evasion. During its extensive research, Oxfam found that Bermuda and other British territories were among the worst tax havens in the world. This is especially true when considering the United State’s use of these tax havens.
The Global Effect of Tax Havens
In 2012, Oxfam discovered that corporations in the United States reported profits of over $80 billion through the use of Bermuda tax havens. This practice is referred to as “profit-sharing”, and works to decrease the taxes owed by participating corporations, which in turn increases their total profits substantially. Without this practice, these corporations would be required to abide by the regulations in the United States and other countries of business by paying corporate taxes. However, tax havens like Bermuda, the Cayman Islands, and the British Virgin Islands, require that little to no corporate taxes be paid. But, what global effects do tax havens really have?
According to Oxfam, corporations that follow these practices aid in the distortion of the global economy, which means many governments go without precious resources. In fact, according to the Oxfam list, developing countries lose $138 billion each year due to the profits gained by oversea tax incentives.
“Tax dodging isn’t an abstract accounting game – the lost revenue has devastating consequences for the world’s poorest people who miss out on life-saving medicines and the chance to go to school.”, stated Ana Arendar, the head of inequality at Oxfam. However, the government of Bermuda has a very different take on this issue.
In its tax haven list, Oxfam stated that Bermuda and other locations were home to numerous shell corporations. However, the government of Bermuda denied these claims and even stated that they have cooperated with the fight against tax avoidance in the past.
“The government of Bermuda notes with surprise and disappointment statements by Oxfam concerning tax and transparency in which Bermuda has been wrongly included.”, stated Everard Richards, Bermuda’s premier and minister of finance.
He continued by stating, “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.”.
After the publishing of the Oxfam list, Bermuda’s prime minister even vowed, “If you’re a tax dodger, we’re coming after you. If you’re an accountant, a financial adviser or a middleman who helps people to avoid what they owe to society, we’re coming after you too.”.
Combating Tax Avoidance
Given the increasing pressure to combat tax avoidance through the practice of tax havens, some countries have decided to drop their corporate tax rates over the next few years. The hope is that as the corporate tax rate begins to decrease globally, less companies will be urged to participate in oversea tax havens. Meanwhile, organizations like Oxfam will continue to combat the global poverty caused by tax avoidance more directly. However, in order to instigate universal change, the governments behind these tax havens will need to cooperate by constructing regulations of their own and eliminating unfair tax incentives.
To learn more about Bermuda tax evasion and similar cases, check out the Jeffrey Newman Law Whistleblower Help Center and blog!