Government is discussing a carve-out for the island’s international insurance industry in multilateral discussions towards a new global agreement on a minimum corporate tax rate.

Finance minister Curtis Dickinson said the carve-out was one of the issues on which Bermuda’s representatives were focused.

During question time in parliament on Friday, the Minister said, “We have articulated four or five areas of concern.

“One of them would be the overall (tax) rate that is being contemplated. Initially, there was a 12.5 per cent rate and now there appears to be some emphasis around 15 per cent (the minimum corporate tax rate to which all countries would have to agree).

“We expressed a point of view around the method of blending – whether it is jurisdictional or global blending (mixing of income from different jurisdictional sources and rates of taxation).

“We also talked about a carve-out for substance – a carve-out for insurance and reinsurance.

“We also talked about a maintenance deferred tax accounting treatment for companies.

“Those are among the things we highlighted during our discussions and things we continue to highlight in conversations with other key allies, other countries that are also participating in the inclusive framework discussions and who may have similar interests to Bermuda with respect to the implementation of this initiative.”

Director of the OECD Centre for Tax Policy and Administration, Pascal Saint-Amans, has previously stated it was not realistic to seek international agreement on a global minimum tax deal without some form of carve-out to recognise economic activities – a substance-based carve out.

Such an accommodation existed in the earlier European blueprint, but no such provision was included in the latest United States proposal that has breathed new life into the international talks.

The Finance Minister earlier updated the House of Assembly with the work of the Organisation of Economic Cooperation and Development Committee known as the Inclusive Framework on Base Erosion and Profit Shifting (BEPS), in which Bermuda participates.

In responding to questions from Opposition leader Cole Simons and OBA member Scott Pearman, the Minister said, “We are doing some work within the Ministry of Finance, a bit of a data call so that we can try to ascertain the impact of Pillar One and Pillar Two on constituent companies that are located in Bermuda.

“Pillar One is largely targeted at technology companies for which we have none located here in Bermuda.”

Meanwhile, the Opposition leader has confirmed to The Royal Gazette that he wishes to take the Minister up on his offer to share with him, in confidence, Bermuda’s ally countries in the negotiations.

The Minister thought it inappropriate to reveal the information publicly.

Further, the Minister pointed out that while a new Tax Reform Commission will be empanelled, they will be concentrated mostly on domestic issues in the run up to October.

He said, “The Tax Reform Commission may not engage in the full scope (of their work). They won’t be able to opine fully on the impact of the OECD initiative on potential tax reform.

“There is still a body of work that needs to be done with respect to reviewing domestic taxes. And initially, I think, the work around tax reform was contemplated to focus almost solely on domestic matters, while keeping an eye on developments at the OECD.”

He assured that the group would have a chance to consider the global tax initiative more fully, once decisions are made in October.

But he admitted that Bermuda had to keep a close eye on developments, because of the change in the tenor of the talks.

He said, “Anyone who has followed the events would know that there was a bit of a radical change in direction with the inauguration of (US) president Biden. Prior to that, there was a view that the OECD discussions around BEPS Pillars One and Two were being led out of Europe.

“And I think the prior US administration had taken a bit of a hands-off approach. That has changed as a result of.…or after January 20th.

The Minister said there is ongoing work parallel to OECD developments. Various ideas have been floated for inclusion in talks by members of the framework.

He said, “My team who sit in those meetings, can ascertain if there is any consensus in those ideas and we can start doing some potential scenario-playing with respect to our own situation. So, I don’t expect there is going to be a hard start coming up to October or once October has happened.

“I expect that this will be an issue that will be front of mind for folks, keeping a watching brief on what’s going on and start to begin to think about potential impacts on Bermuda and how we potentially respond to it.”