The Government of Bermuda has set its sights on becoming a hub for financial-technology companies, and it has a strong message for those who see the offshore financial centre as just somewhere to hide misdeeds.
“We will rat you out, plain and simple as that, because our reputation is a critical part of our calling card, and unless we can demonstrate how serious we are about this, then people will not take us seriously,” Bermuda Finance Minister Curtis Dickinson told the Financial Post in an interview last week.
Dickinson was in Toronto as part of a delegation trying to drum up new business between Bermuda and Canada, which had two-way trade of US$2.6 billion in 2017, according to the Bermuda Business Development Agency (BDA).
Located in the Atlantic Ocean about a two-and-a-half hour flight southeast from Toronto, Bermuda has large tourism and financial-services sectors — and no corporate, income or capital gains taxes, something that has earned the tiny nation a reputation as a tax haven. Its biggest industry is insurance.
“We’re not asking Canadian companies to pull up roots and move from Canada to Bermuda,” Dickinson said. “But in as much as you have an international business that needs an offshore presence, we would argue that Bermuda is a great place to put it.”
Bermuda, which had a new government take power in 2017, is also making fintech a priority. The delegation to Canada had followed an appearance by Bermuda Premier David Burt at Toronto’s Collision tech conference in May, for a panel on finding the right mix of innovation and regulation.
There is a single regulator for the financial industry on the island, the Bermuda Monetary Authority, which the delegation to Canada hailed as being progressive and nimble enough to respond quickly to industry needs and to keep red tape to a minimum.
As well as making fintech-friendly tweaks to banking and immigration laws and rules, the country’s parliament passed legislation last year to regulate firms dealing in cryptocurrency. While it has only one company licensed so far under its regime, according to Denis Pitcher, the chief fintech advisor to the premier, there are a number of others in the pipeline and four initial coin offering permits that have been issued.
In as much as you have an international business that needs an offshore presence, we would argue that Bermuda is a great place to put it
“We’re not in any rush, because we don’t need quantity, we want quality businesses,” Pitcher said.
Bermuda is also looking to rekindle connections with Canada to diversify itself in the face of political volatility in the United Kingdom and United States.
“We think that Canada … will benefit from some of that by being sort of like the stable economy in North America, given that people will go and look for safe havens in terms of where they do business and where they set up and can trade more globally with the world,” said BDA CEO Andy Burrows.
There has been some progress on the tax perception, too. Bermuda was removed from a European Union list of non-cooperative tax jurisdictions in May, with the EU council saying Bermuda had taken positive steps, and that it “remains committed to address EU concerns in the area of collective investment funds.”
But Bermuda needs to keep putting in face time.
“Unless we keep our engagements regular and on a regular schedule, then we run the risk of our story kind of slipping, because people don’t remember who it is we are,” Dickinson said. “They have their own preconceived notions based on what they’ve read.”
Canada’s Parliamentary Budget Officer issued a study last week on international taxation that found Canadian taxpayers reported $29.7 billion in transactions with affiliated companies in Bermuda in 2016, 0.8 per cent of the total deals reported between Canadian firms and foreign affiliates that year.
However, Canadian companies had reported nearly a trillion dollars in reportable transactions in 2016 with affiliates in offshore financial centres, such as Bermuda, which are remote and have lower taxes. If just 10 per cent of that money had avoided Canadian corporate taxes, it would mean an approximately $15-billion loss of tax revenue, the report said.
Dickinson noted he gets production orders from countries seeking documents every day. Canada and Bermuda have also had a tax-information sharing agreement in effect since 2011 (and Bermuda has similar deals with 40 other countries), which the minister said should give the Canadian government some comfort.
“All that’s required is for them to make a request,” he said.