Bermuda’s Premier David Burt called the island’s tax blacklisting by the European Union a “setback,” but said that, as of Wednesday, he believes Bermuda is compliant with EU requirements and should be removed at the next EU Council meeting in May.
Surrounded by business leaders, Mr. Burt told local media at a press conference that the developments “are not where we want to be, and certainly not where we intended to be when we embarked on this process.”
But, the premier added, “Bermuda is compliant and we are confident that within a matter of weeks that will be accepted by EU member states and Bermuda will be removed from this list.”
Mr. Burt said U.K. Treasury officials had supported that view, arguing that Bermuda had legislated to address any remaining issues identified by the EU.
The EU on Tuesday added 10 countries, including Bermuda, to its list of countries it deems uncooperative in tax matters. News agency Reuters earlier this week cited EU documents in which the EU Commission claimed that Bermuda had been “playing games” and had added new loopholes to its revised legislation. Bermuda had also not provided a final text of its legislation by the set deadline, according to the report.
Bermuda’s premier rejected this interpretation, claiming that any issues were the result of a “technical omission which was rectified in good time.”
Bermuda’s Finance Minister Curtis Dickinson ascribed the problems with the EU’s Code of Conduct Group, which evaluates compliance with EU requirements, to “a slight typographical error.”
The omission meant that Bermuda’s submission was incomplete because one provision was not included.
“Once we realized we had an issue, we rectified it immediately and got our submission in – in time for it to be properly considered by Ecofin [Economic and Financial Affairs Council],” Mr. Dickinson said.
Like the Cayman Islands, Bermuda committed to introducing new legislation that requires Bermudian businesses that are part of a multinational group to demonstrate sufficient economic activity on island to justify that profits allocated to the entity remain untaxed.
Bermuda’s Economic Substance Regulations came into force on the last day of 2018, but on Jan. 30, 2019, the Code of Conduct Group raised concerns about some of the provisions and requested amendments to be made before Feb. 24.
Bermuda made the changes on Feb. 22, but on Feb. 27, the EU flagged another issue, Mr. Dickinson explained.
Bermuda made additional changes a week later. However, Mr. Dickinson said some press reports indicated that this March 4 revision was not fully considered in the final evaluation.
Bermuda’s premier added that he did not accept the notion that Bermuda had missed the deadline.
“This has been an evolving target. Our submission was made prior to the deadline. There was a minor technical omission that was flagged to us; we made sure that was resolved in good time,” he said.
“Between now and May, a fairer assessment of Bermuda’s legislation will confirm our compliance, and we will be removed from this list,” he added.
Bermuda-headquartered offshore law firm Conyers Dill and Pearman called the blacklisting “unexpected.” The firm advised clients in a notice, “We have been assured by the Bermuda Government that it is doing everything it can to ensure that this situation is temporary.”
In the past years, Bermuda has become known in connection with “double Irish, Dutch sandwich,” a legal tax avoidance structure that allowed Google, owned by Alphabet Inc, to reduce income and withholding taxes on overseas profits from royalties, by channeling them to a Bermuda-based subsidiary that has no staff or office space.
In January, media reported that documents filed with the Dutch Chamber of Commerce showed Google had moved nearly $23 billion to Bermuda through a Dutch company in 2017 alone.
Asked about the lack of substance of the Google entity, Mr. Dickinson said, “We would like to encourage Google, [who] are part of the issue, to help us through this by establishing a more substantive presence in Bermuda. We think that works for both ourselves and for Google.”