ABIC Slams US Patriot Tax As 'Bad Law'

by Mike Godfrey, Tax-News.com, Washington

22 April 2002

The Chairman of the Association of Bermuda International Companies, (ABIC), has joined the chorus of voices condemning a planned new US international tax law, dubbed the 'Patriot Tax' as rushed and ill-considered.

Speaking to the Hamilton Rotary last week, David Ezekiel, said that bids to remove the benefits for US companies reincorporating offshore could be seen as 'bad law looking to patch up previous bad law'.

One of the champions of the US patriot tax campaign, Senate Finance Committee Chairman, Max Baucus revealed recently that he plans to bring the new international tax legislation to the vote soon, and announced that he was 'quite confident' that bills limiting the benefits of offshore reincorporation will be passed into law this year.

However, the ABIC Chairman asserted last week that the US furore was not Bermuda's problem, nor was it an issue on which Bermuda was obliged to act.

He told Rotarians that to his knowledge, very few other countries seek to impose the same levels of punitive taxation on taxpayers' non-domestic income.

'Pretty much most of the relocation is to do not with shielding US income, but non-US income,' he explained, adding that: 'The US is one of a handful of countries, I think the Philippines and Australia are the only other two, that actually tax non-domestic source income domestically.'

Mr Ezekel then hit back at US media reports of a multitude of 'brass plate' or 'paper' companies being established in the low tax jurisdiction.

'We have been reading, mainly in the US press about paper companies. Well there are a number of paper companies, but that is not Bermuda's bread and butter.' He continued: 'Bermuda's bread and butter is the physical presence of companies that are located here. There are about 12,500 international companies in Bermuda of which 3%, about 372, have a physical presence. That 3% provides over 80% of the income that Bermuda earns from international business.'

The ABIC chief concluded his speech by echoing the words of Bermudian Premier, Jennifer Smith, who last week spoke out for the first time against the US attacks.

He pointed out that the jurisdiction's tax system has been in place for over 100 years - at least 50 years before the advent of international business activity on any significant scale.

'We haven't put anything in place to enable movement,' he said. 'But we need to remind people, free country, free world.'

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