Cox: Gibbons Irresponsible, Uninformed and Misguided
Minister Paula Cox responded to the misleading and irresponsible remarks by Dr. Grant Gibbons with a strongly worded correction. Minister Cox, in full:
There is the perception, rightly so in some cases, that countries are scrambling to meet the new threshold set in place within the last few months by the OECD and taken up by the G20 of signing 12 Tax Information Exchange Agreements (TIEAs).
However, in the case of Bermuda, there is no scrambling taking place whatsoever and for Dr. Gibbons to publicly state otherwise based on an uninformed and misguided impression is politically irresponsible of him, both as a Bermudian and particularly as a representative of the Bermuda Parliament. This information has been provided by me at many public opportunities, including periodic ministerial statements to the House.
Additionally with respect to the Shadow Finance Minister's comments in the Royal Gazette of 23rd April 2009 regarding the Shadow Finance Minister's query on the deadline of September 2009 to achieve 12 TIEAs, he should have been aware that the publicly available 2nd April 2009 G20 Communiqué stated that a review of its communiqué would occur at its Finance Minister's meeting in Nov 2009 to be held in Scotland. Also the Mid Ocean News in its 17th April 2009 article stated that the UK Prime Minister wrote to the Overseas Territories and decided to impose his own earlier deadline of the date of the Sept 2009 meeting of the UN General Assembly. The first knowledge we had of the UK's imposed earlier deadline of September 2009 was on receipt of the Prime Minister's letter.
Notwithstanding this, I appreciate the opportunity to point out at this time that Bermuda had done its part to meet the recently introduced 12-TIEA standard, and that it is the OECD countries that delay the process between completing the negotiation and signing the TIEA, not Bermuda. In fact, the OECD refused to recognize completed negotiations even though their members are holding up the signing process, and that the UK did not choose to advocate for Bermuda's 12 TIEAs on a completed negotiations basis like China advocated for Hong Kong. Basing the white list on a completed negotiations basis is more than reasonable if it is the OECD members who take longer than overseas territories like Bermuda to ready themselves to put pen to paper.
In point of fact, following years of dedicated negotiations with benefits agreements accrued for Bermuda in each case, Bermuda has signed 11 TIEAs and is poised to sign a further three TIEAs in relatively short order with Germany, the Netherlands and Mexico. Further, meetings have been held with representatives of another OECD member and formal negotiations with Canada have commenced in accordance with the Finance Ministry’s business plan objectives for 2009/10. There are very few countries who have such a track record of continuous and diligent efforts made to conclude and now sign TIEAs with a wide range of countries. Although some may only reflect on the numbers that seem to match Bermuda’s the fact remains that Bermuda has in fact engaged with many more countries from various regions.
In response to those who question how we were caught short of the 12-TIEA threshold and placed on a grey list, it is important to note that there was no OECD/G20 criteria of 12 TIEAs until a few months ago. The 12-TIEA formulation is an arbitrary number given as a recommendation of a sub-committee of the OECD Global Forum which is yet to be ratified by all participating members in a plenary session. Under pressure from the G-20, the OECD prepared a status report based on 12 TIEAs but this criteria was taken up by the G-20 as the basis for black and grey-listing for meeting other political purposes, and as the case turned out, carelessly separating the wheat from the chaff. For example, why is Hong Kong not on the grey list?
The 12 TIEA standard was a recommendation made in late 2008 for consideration for the full OECD Global Forum expected that was expected to meet a year later in late 2009. Bermuda is well positioned to meet this recommendation if adopted by the OECD Global Forum. Bermuda is also well positioned to meet the last minute deadline set by the G20 or by the UK prime Minister.
In many respects the process was highjacked. The fact that a superpower or foreign government or regulator moves arbitrarily to make decisions that counter our efforts does not diminish the effort that was made. While any stakeholder who lobbies EU, OECD, or US Congress whether Government of Bermuda or industry associations or any one else the fact that the superpower or foreign government or regulator opts to make a decision that is counter to our national interests does not invalidate quality of representation made by the Government of Bermuda or our industry associations. The actions taken that have affected Bermuda are contrary to the principle of the level playing field but there is no question that Bermuda has been forthright with its efforts to conclude TIEAs in a timely fashion based on measured and quality representation.
Just last year, the OECD repeatedly commended Bermuda as being fully compliant with the OECD standard for effective exchange of information. Jeffrey Owens, director of the Centre for Tax Policy Administration at the OECD, favorably mentioned Bermuda as one of the jurisdictions which upholds its obligations under TIEAs. He pointed out at that time that only seven centres, one of which is Bermuda, were fully compliant with OECD transparency standards. A few months later the G20 seems to have obtained a different position from the OECD.
Moreover, the U.S. Department of the Treasury recently wrote a letter to the Government Accountability Office (GAO) reasserting its desire to continue to expand its tax treaty and tax information exchange network, of which Bermuda is a long-standing partner. Within this letter, it condemned the oversimplification and misuse of the term “tax havens’ by the GAO itself.
The OECD has stated that in relation to tax matters, the only distinction to be made between jurisdictions is on the basis of whether or not they are cooperative. Rather than rashly sign treaties with no intention of being willing or capable to respond to any requests for information made under these treaties, Bermuda has over 20 years experience exchanging information under its treaty with the United States, and has put this experience in a working relationship to good stead with the TIEAs we have in effect with other countries such as Australia and United Kingdom. There is no doubt by our treaty partners that we are committed to tax information exchange and are not just signing papers that are worthless in practice but valuable politically.
To be clear, what Dr. Gibbons overlooked when he made his comments about Bermuda not moving forward in a dedicated manners following our commitment to the OECD in 2000, was the history of the TIEA process as it relates to OECD. In fact, following the commitment given by Bermuda and other financial centres in 2000, the OECD process to iron out the underlying details of the engagement with participating partners took some years of additional meetings and work. The OECD did not finalise the model agreement until 2002. In fact Bermuda directly assisted the process by being one of 11 jurisdictions that participated in an OECD sub-committee that developed the 2002 Model Agreement on Exchange of Information in Tax Matters, on which the bilateral agreements countries are signing today are based.
Finally, the onus was on OECD members to reach out to financial centres with whom they wish to negotiate a TIEA and for jurisdictions such as Bermuda to respond in kind. Australia was one of the first OECD members to formally request a TIEA with Bermuda in January 2004. A request followed from New Zealand in March 2004, and from Germany in May 2004. Other requests from OECD members came in 2005, 2006, and 2007. Bermuda does not need to find excuses regarding our TIEA progress; as to date, Bermuda has signed 11 TIEAs and is poised to sign a further 3 TIEAs in relatively short order with Germany, the Netherlands and Mexico which will give us total signed TIEAs of 14, comparable with the Channel Islands.
The negotiation process requires parties to exchange their views and to build relationships. In order to be successful, it takes time. I would like to quote the acknowledgement given by New Zealand Revenue Minister Peter Dunne in his press release on 31st March 2009:
“Bermuda agreed to work with New Zealand towards the conclusion of a TIEA long before the recent developments. I congratulate Bermuda on its progressive stance, and look forward to strengthening the spirit of goodwill that has developed between our two countries.”
It is also important to emphasis that this is a process which must be embraced by all members of the community. I understand that although representatives of the Government of Switzerland has undertaken to make commitments regarding exchange of information and revision of the bank secrecy regimes, there are many members of the Swiss community who are resisting and threatening a referendum. That has not been the experience in Bermuda as great efforts have been made to ensure that there has been consultation on a regular basis and I have continually updated the House on developments. I can reflect in past and early meetings at meetings of the IBF that many queried the value of TIEAS- saw little benefit- the G-20 statement has made a world of difference and I am gratified as the MOF was clear and determined as to the course we had to take and that we will continue to take to protect and safeguard Bermuda’s national economic interest and reputation.
Having said all this, the geo-politics of the G20 London Summit was not a discussion point of any note at RIMS 2009. Bermuda was very well-received and continues to be viewed as a jurisdiction of choice for international insurance business.
There was a strong turnout at the Willis Breakfast where I gave the keynote address focusing on the strengths of Bermuda as an international hub for insurance. The CEO of Ironshore, Mr. Kevin Kelley also spoke at the Breakfast and firmly endorsed Bermuda as the place to be.
The upshot is that if Bermuda continues to raise the bar while maintaining a strategic focus on business development requirements for our financial sector, we will continue to have success.
We look forward to Grant Gibbons' retraction.
