Bermuda needs to maintain personal contact with French government officials to avoid “nasty surprises” like the punitive measures meted out to the Island last year, according to Finance Minister Bob Richards.

Reporting on his recent trip to Paris and Brussels, Mr Richards told MPs in the House of Assembly today that he encountered philosophical differences on taxation while in the French capital.

Ensuring that politicians understand the value to their countries of Bermuda’s reinsurance industry will also be important in ensuring that the Island clinches “third-country equivalence” with new European insurance regulation standards.

Last year, France ‘blacklisted’ Bermuda as an uncooperative jurisdiction and imposed a 75 percent withholding tax on all money transfers from France to Bermuda. The blacklisting and the punitive measures have since been lifted, but Government felt it would be beneficial to speak with members of the French administration.

While in Paris, Mr Richards, accompanied by Alastair Sutton, the Island’s representative in Brussels, spoke with the president of the Senate Finance Committee, Phillipe Marini; Pierre-Alain Muet, member of the Finance Committee of the Assemble Nationale; and Gael Perraud, member of the Cabinet of the Minister of Finance.

“There is a stark difference between the way taxes are viewed on this side of the Atlantic and in France,” Mr Richards said. “In France taxes are viewed as a moral obligation while over here it is viewed as a legal one.

“That difference in philosophy will be the cause of challenges between ourselves and France going forward.

“It is therefore imperative that the Bermuda Government forges its own contacts and relationships with French authorities and nurtures them with periodic personal contact going forward. Such relationships will be essential in dealing with the ever-changing economic and political landscape that is characteristic of today’s Europe.”

The Deputy Premier said the meetings had been beneficial in helping to dispel misconceptions the French officials had about Bermuda, its tax system, government structure and constitutional status.

“However, nothing that we said really changed their minds that Bermuda was ‘un paradis fiscale’ — a tax haven,” Mr Richards added.

“There was limited appreciation of the size and importance of Bermuda’s reinsurance industry, although Bermuda has covered and paid claims for some major disasters in France.

“French officials uniformly expressed concern about large multinational corporations conducting business in their country and not paying their ‘fair share’ of taxes in France. Many such corporations have holding companies in Bermuda.”

The Finance Minister also attended the International Regulatory Conference held annually by the Association of Bermuda Insurers and Reinsurers (ABIR) in Brussels, where the focus was the imminent decision by the European Commission to grant Solvency II equivalency status to Bermuda.

The final decision is expected next summer.

“Bermuda is one of only three entities, along with Switzerland and Japan, that are being considered for the first round of equivalency,” Mr Richards said.

“It is the only country that is not a sovereign nation. ABIR members collectively conduct very significant business in Europe: $70.1 billion in gross premiums; $95.4 billion in surplus.

“Standard and Poor’s estimates that Bermuda has 16 of the world’s top 40 insurers and two in the top ten. By contrast Europe has 11 of the top 40, and the US has six of the top 40. In terms of share of global insurance premium, Europe has 56 percent, the US 19 percent, Bermuda 16 percent and Asia nine percent.

“This is the context in which Bermuda, the dot on the map, is being considered in the first wave of entities seeking Solvency II equivalency.”

He added that the Bermuda insurance industry had worked hard, along with financial regulator the Bermuda Regulatory Authority (BMA), to show that the Island’s regulatory and legal structure could match European standards.

“While the analysis of our regime and the recommendation for equivalency is being made at the technical level involving ABIR and the BMA, the final decision will be made by the European Commission and the European Parliament, ie — at the political level,” Mr Richards said.

“It is therefore imperative for Bermuda to continue its contacts at this political level to ensure success for our most important economic sector.”

He added that “continued personal contact will be necessary with France in order to avoid any more nasty surprises like we had last year”.