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Bermuda Delineates Fact from Fiction in Answering ICIJ Reports

Fact versus Fiction
November 13, 2017

According to its website, the International Consortium of Investigative Journalists (ICIJ) recently obtained a collection of hacked confidential records known as the Paradise Papers from a global law firm (Appleby). ICIJ reported that the records contain data with what it alleges are "the names of people and companies behind secret offshore structures" that, in some cases, are used to reduce or avoid taxes. 

Bermuda is one of the worldwide offshore jurisdictions implicated, and, according to various reports, Bermuda-based captive insurer Trident Insurance Company is among the named companies.

BDA Response

A press release from the Bermuda Business Development Agency (BDA) responds to the ICIJ reports with the following information.

Reportage about hacked data from global law firm Appleby has highlighted the substantial lack of media understanding of offshore investment structures and Bermuda's longtime reputation for tax transparency and cooperation with international authorities, the press release points out.

Bermuda is committed to the exchange of relevant information to legitimate regulatory, tax, and law enforcement entities, the press release maintains, explaining that these entities can request and receive information from Bermuda under information-sharing agreements, including Tax Information Exchange Agreements and a multilateral treaty with more than 100 countries.

"Automatic exchange of financial information is also an established part of our economic system," BDA says in the press release.

The island's early adoption of Organization for Economic Cooperation and Development (OECD) standards for Base Erosion and Profit Shifting compliance clearly demonstrates this transparency via several agreements that ensure automatic transmission of taxpayer financial data to relevant authorities, according to the press release.

Notably, Bermuda is a signatory to the Multilateral Competent Authority Agreement for automatic exchange of financial account information via Common Reporting Standard and Country-by-Country (CbC) reports, says the press release. Also, the island has signed a Model 2 intergovernmental agreement with the United States under the Foreign Account Tax Compliance Act—again, enabling automatic exchange of information from Bermuda-based financial institutions.

As a direct result of meeting these stringent standards, Bermuda this fall was the first overseas territory to be awarded whitelist status by France for CbC reporting, the BDA press release continues. Also, Bermuda is judged "largely compliant" by the OECD Global Forum rating following a peer-review process of tax-transparency standards—a rating shared by Canada, Germany, and Norway, among other nations.

Additionally, the United Kingdom has an agreement with all its Overseas Territories under which Bermuda shares information within 24 hours.

"Our 70-year-old register—with a starting threshold at incorporation of 10 percent beneficial ownership (versus the United Kingdom and others at 25 percent)—is continuously updated when shares in a company are transferred, as opposed to citing dates of incorporation or annual returns, as is the practice in the United Kingdom and other jurisdictions," BDA says in the press release.

The issue of privacy versus secrecy has also been confused, the press release states and then offers an explanation: Privacy provides protection over confidential information within a well-regulated, safe environment—yet ensures sharing with tax authorities under Bermuda's global treaties. Secrecy, by contrast, enables concealment of information that should be disclosed.

"Given Bermuda's strong record on compliance and global transparency, our system respects privacy yet shuns secrecy," BDA says in the press release.

The press release continued as follows. It should also be noted that "tax haven" is a poorly understood term, particularly by nontrade media. Bermuda does not qualify as a tax haven under a clear OECD definition that stipulates criteria, including lack of transparency and lack of information exchange. No or nominal tax is not sufficient to classify a country as a tax haven. OECD definitions notwithstanding, the term "tax haven" is synonymous with tax evasion and secrecy—neither of which describe Bermuda.

"Bermuda understands and embraces the worldwide movement toward greater financial transparency and regulatory cooperation and continues to commit to international tax disclosure and compliance," says BDA in the press release. "We've shown leadership in this sphere and have helped drive global anti-money-laundering directives and anti-terrorist financing standards. These factors differentiate Bermuda from other financial centers, and we stand by that reputation."

From the same press release, read additional responses from Bermuda industry groups.

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