Bermudian Premier Defends Island's Reputation At Insurers' Forum

by Mike Godfrey, Tax-News.com, Washington

10 April 2003

Bermuda's Premier Jennifer Smith used her opportunity as a keynote speaker at the Mealy Insurance and Re-insurance Roundtable Forum in Arizona last week to dispel myths relating to US 'corporate inversions' to the island.

Growing hysteria in the US regarding companies reincorporating offshore, allegedly to avoid taxes, has reflected badly on Bermuda and led Smith to observe that much of the criticism aimed at the jurisdiction over the issue has been "well over the top." A leading concern is the proposed Patriot Tax Act which will penalize American companies for incorporating overseas.

The Bermudian Premier pointed out to the Forum that under the US tax code, it is perfectly legal for an American corporation to register offshore and thus reduce their tax bill on income derived from foreign sources. This is not something new, she announced, but has been practiced since the end of the Second World War. She suggested that the recent controversy reflects problems within the United Sates rather than anything untoward taking place in offshore jurisdictions.

According to a Royal Gazette report, Ms Smith sought to reassure the Roundtable that the regulatory standards in Bermuda are of the highest order and rigorously enforced. “Our monitoring, supervisory and regulatory regimes are above reproach. And we steadfastly support every effort to clamp down on illegitimate activity,” she told the insurers.

Returning to the subject of taxation, Ms Smith noted somewhat ironically that a tax treaty has been in place between Bermuda and the United States since 1986 which commits both nations to sharing information on money laundering and harmful tax practices. She added that the Organisation for Economic Cooperation and Development (OECD) was considering using the treaty as a model for other agreements between member countries and offshore jurisdictions.

Ms Smith also revealed that the 'know your customer' standards set out in the Patriot Act have more or less been in place in Bermuda since World War Two, and were formally passed into legislation in 1997.

The Bermudan Premier went on to emphasise to the audience the important role that the island plays in the global insurance market. She pointed out that the jurisdiction is the third largest centre for insurance after New York and London, and explained that it played a vital role in maintaining market stability in the aftermath of September 11, as Bermudan companies invested heavily in Lloyds' recovery.

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