By Jonathan Kent
- Most businesses are keeping their cards close to their chest when it comes to their views on the proposal for a global minimum tax rate. The plan for all profits of large, multinational companies to be taxed at a rate of at least 15 per cent moved a step closer to reality in June when 130 jurisdictions agreed to an outline of a global tax system overhaul plan developed by the Organisation for Economic Cooperation and Development/G20 Inclusive Framework, which includes Bermuda.
As Annabel Cooper’s story in Navigate suggests, challenges of achieving broad international agreement on complex mechanisms required to make it work could delay the day when it becomes reality, possibly by a couple of years or more. However, with the Biden administration in the US firmly behind it, joining a slew of revenue-hungry governments, there is a powerful impetus for the changes to take effect in some form. Depending on the scope and carve-outs of any agreed minimum tax, the implications for Bermuda could be substantial.
The main concern will not be over the “mailbox” entities that have no physical presence here and who may leave in droves if their tax advantage evaporates, it will be for the international businesses who employ people, particularly our flagship re/insurance industry.
A minimum tax may create incentives for Bermudian re/insurers to change the way they operate, but unsurprisingly the industry seems reluctant to talk about the potential impact.
Perhaps we are approaching the time when we find out whether re/insurance leaders have been completely honest with their consistent message over many years that tax is well down the list of the reasons they choose to domicile in Bermuda. Actions will speak louder than words.
- In June, Curtis Dickinson, the finance minister, unveiled an economic recovery plan featuring 31 priorities to boost Bermuda’s medium-term economic growth as the island looks to rebound from the damage caused by the pandemic. The plan is intended to “stimulate job growth, tackle inequality and help shape the future of Bermuda”, Mr Dickinson said. The plan includes support for specific sectors, economic diversification, labour market interventions, and efforts to accelerate digital transformation. Among more specific aims are the launch of a casino, the construction of a shoreside “fish factory” in St David’s and a national digital bank.
- Fintech developments included the launch of Circle Yield, claimed to be the “first regulated crypto-yield product in the world” out of Bermuda. Circle, an Irish-based company with a Bermuda subsidiary, operates USDC tablecoin, one of the top ten largest cryptocurrencies by market capitalisation, and has plans to become a public company with shares trading on the New York Stock Exchange.
Meanwhile, 60 digital nomads employed by Afiniti, a Bermuda-incorporated company that develops artificial intelligence software, are to leave the island after less than a year, the company announced in June. Afiniti owner Zia Christi had said in January that he planned to build up his island-based staff to 1,000 over the next five years. A spokeswoman for Afiniti said the company remained “firmly committed to our headquarters in Bermuda”.
- Retail sales extended their winning streak to nine consecutive months of sales volume growth, as figures released by the Department of Statistics indicated year-over-year gains of more than 4.5 per cent in February and 7.7 per cent in March of this year. The increases in on-island spending, likely linked to fewer residents travelling overseas during the pandemic, may be one of few economic spin-off benefits of Covid-19. This follows a bumper Christmas for local retailers with December sales volume up 14.2 per cent. However, takings in April would inevitably have taken a hit when a spike in Covid-19 cases caused restrictions to be tightened again.