Wounds that heal and cracks that fix

Tell me all your politik

And open up your eyes

— Cold Play

Last year I wrote a piece titled the “Full Monty” speaking to the challenges facing Bermuda’s IB sector. I think these issues bear repeating.

Bermudians have been repeatedly told that the imposition of Term Limits is the primary reason for the weak economy and decline in a standard of living. As if repeating this over and over again would somehow make it true.

That’s simplistic and baseless — several factors contributed to the sterilisation of our golden goose. For the most part we can all take some of the blame. Many brought and still buy into the view that the PLP singlehandedly caused Bermuda’s economic demise. We are not masters of our domain and our economic fate will rise and fall with those of our major trading partners.

While the reinsurance industry sector has grown world-wide since the credit crunch in 2007/8, Bermuda has experienced a noticeable contraction and this trend may very well continue as low rates encourage mergers and consolidations continuously bringing about redundancies.

Here is a list of challenges the OBA conveniently skipped telling Bermudians about.

•Repatriation

Global multi-country groups such as the OECD and the G20 have targeted offshore financial centres and low tax regimes with unprecedented zeal as their member countries experienced serious financial crises post 2008. They are now pushing for strong clamp downs on tax avoidance by major global companies.

Recently, UK Prime Minister David Cameron made a statement referring to Google’s $6 billion tax avoidance, by using Bermuda to minimise its tax burden, as “unacceptable” and that he would go to the G20 conference to push for further ‘tax haven’ clamp downs.

This type of news has led to many major global companies coming under fire for not showing good corporate citizenship in the countries in which they are actively doing business. Hence there is now a trend of global companies rushing to show greater responsibility by “repatriating” from Bermuda to either their home countries or those not on the OECD’s target list.

Prime examples, Tokyo Re and Millenium Re both relocated recently.

•FATCA

The US Foreign Account Tax Compliance Act (FATCA), signed into law by President Obama in 2010, was introduced as a revenue raiser for the US government coffers depleted by the bailouts and to service the US national debt. The goal of FATCA is to expose US citizens, who evade paying US taxes by hiding assets in undisclosed foreign bank accounts.

FATCA is another heavy handed piece of legislation that effectively compels financial institutions (FI) worldwide to become a reporting arm of the IRS.

Failure to comply means your FI may not transact in US dollars.

As of January 1, 2014, FATCA required foreign financial institutions such as banks, stock brokers, hedge funds, pension funds, insurance companies and trusts to provide reports to the US.

Internal Revenue Service (IRS) on each of their US clients.

If an institution does not comply, the US will impose a 30% withholding tax on all its transactions concerning US securities, including the proceeds of sale of these securities.

FATCA also requires any foreign company not listed on a stock exchange which has at least 10% US ownership, to report the details of any US owner to the IRS.

The UK has its own version of FATCA.

This forces Bermuda to reveal the identity of individuals behind nominee concealed business entities, account holders and trusts, but will also deal severely with those who try to hide money abroad for fraudulent purposes.

All of this compliance cost is borne by the financial institutions themselves, making offshore operations that much more costly.

Hmm, did the OBA mention any of this?

•Keeping it 100

Bermuda, it is easy for us to continue to point fingers and blame one group of our island as “racist” or another group as “radicals.” However, we have to start keeping it 100 (keeping it real) with each other and about each other.

Let us all begin to seek facts and speak to facts. Repeating political fables obviously does not solve our islands multiple challenges. We really have no choice if we plan to survive together.