Bermuda deals blow to David Cameron’s hopes for tax evasion pact
14 June 2013
Posted by: Author: Vanessa Houlder, George Parker and Robin
Author: Vanessa Houlder, George Parker and Robin Harding
David Cameron’s hopes of agreeing an international deal on fighting tax evasion suffered a blow when Bermuda said it would not commit to a pact before next week’s summit of the Group of Eight leading economies.
UK officials fear that if some British Overseas Territories and Crown Dependencies fail to come into line, it could limit the scope for an ambitious agreement at the summit in Lough Erne, Northern Ireland.
The build-up to the summit is becoming increasingly problematic for Mr Cameron and not only over tax. France is blocking the start of talks on a comprehensive EU-US trade deal.
Mr Cameron wants to formally launch the negotiations next week but France is demanding the exclusion of audio-visual services from the talks, to protect the country’s film industry. European trade ministers will try to hammer out a compromise deal with Paris in EU talks on Friday.
Craig Cannonier, premier of Bermuda, said he needed clarification of some points before signing up to a multilateral convention on mutual tax assistance, a treaty that opens the door to talks on helping authorities, particularly in developing countries, track down cheats. "There are stumbling blocks,” he said.
All three Crown Dependencies – Jersey, Guernsey and the Isle of Man – and the Cayman Islands have committed to join the convention, while the British Virgin Islands has agreed in principle. But campaigners said Mr Cameron risks personal embarrassment if all the Overseas Territories do not sign the treaty, having raised the stakes by his public call to "get our own houses in order” before the G8 summit.
Bermuda said it supported the multilateral convention in principle. But it is understood to have several concerns, including issues around costs, security of data and a possible linkage to Mr Cameron’s aspiration for public registers of "beneficial ownership”, describing the true ownership of companies.
Bermuda, along with the other Overseas Territories and Crown Dependencies, are to see Mr Cameron as part of a meeting on Saturday designed to "showcase” the progress towards more transparency.
Mr Cameron will argue that all of those territories and dependencies are showing willingness to co-operate in a future arrangement allowing the automatic exchange of information. He hopes the G8 will throw its weight behind that new regime.
Some jurisdictions have expressed anger about what they felt was arrogance on the part of Downing Street over the issue, which they felt smacked of "old colonialism”. They have been annoyed by the call for registers of beneficial ownership because they say their existing standards for capturing such information are well ahead of G8 countries, particularly the US and UK.
But Mr Cannonier said he never felt under pressure to show up to the summit and welcomed the opportunity to push back against criticism of the island. "We are already there on transparency. Our regulation is second to none,” he said. "We are here to tell the story of our business model, which is captive insurance. We are not a tax haven.”
A spokesperson for the British prime minister said: "We have seen progress on what is a global tax reform agenda, I think we will continue to see progress in the context of the G8, obviously tax and transparency are at the heart of the PM’s G8 agenda.”
Recent revelations about the tax affairs of US multinationals – such as the sub 2 per cent tax rate that Apple pays in Ireland – have shifted the ground on international tax in the US.
The ways and means committee in the Republican-controlled House will hold a hearing on Thursday about tax havens, base erosion and profit-shifting, highlighting the bipartisan interest in the issue.
President Barack Obama’s own international tax reform plan calls for a minimum tax on overseas earnings of US corporations. He also proposes changes to the US tax code such as a levy on excess profits when companies move intangible assets into tax havens.
But Mr Obama is likely to be less sympathetic on issues such as the disclosure of beneficial ownership: company registration is controlled by individual states such as the corporate haven of Delaware. He is also constrained by both the lobbying prowess of US multinationals – which are alarmed at the tone of G8 discussions and the prospect of foreign jurisdictions coming after them for more tax – as well as the fading chances of a big US tax reform now that the budget deficit is improving.