The tax spotlight was turned on Bermuda again after it was revealed that internet giants Google last year paid a tiny percentage in UK tax on sales of nearly $5 billion — by funnelling cash to the island.
Previous revelations about Google’s low tax bills have sparked calls for Bermuda to tighten up on its laws.
But island economics expert Peter Everson said that multinationals wielded enormous power — and were able to get the tax arrangements they wanted.
He added of the UK and US: “All of their problems are written in the tax codes of the US and Britain. The reality is, if Washington wanted companies to pay more tax, it changes the law in Washington.
“These same guys who have all these foreign sales also contribute large amounts of campaign dollars.
“Likewise, David Cameron in Britain, it’s precisely the same for UK companies. In the UK, they’ve made it easier for companies to pay less tax than it used to be.
“Bermuda’s perspective is a PR one — this is what Bermuda is. An international platform for foreign business. It doesn’t cut tax or reduce tax. There are all sorts of different ways to fund governments and electors get to choose the way at the ballot box.”
And Mr Everson said: “Those who shout the loudest, it’s always the problems at home. It’s clear those shouting the loudest are the UK, the US and France, which are the countries with the biggest problems.”
He added that Premier Craig Cannonier was right to call for a united front by the UK Overseas Territories to combat being branded tax havens.
Mr Everson said: “He was right in saying it’s important that the smaller jurisdictions act in the same manner and should all speak out together and say it’s not our problem, it’s yours.”
Mr Everson was speaking after Bahamas Prime Minister Perry Christie told the UN it needed to take action to protect small island economies.
Mr Perry said offshore jurisdictions were the victims of “ongoing economic aggression” by larger countries.
He said offshore jurisdictions should be regulated by UN-led mechanisms to balance the needs of both sectors.
And he warned that crippling offshore economies would cause “tens of thousands of newly-empowered middle class citizens to slop back into poverty or to migrate to the developed world.”
Mr Everson said: “There should be a forum — which one it is, I’m not qualified to say.”
The news came after it was revealed that Google last year only paid 2.6 percent tax in the US on sales worth $8.1 billion — because it channelled most of its overseas profits through Bermuda, which has no corporate income tax.
Previous revelations about Google’s tax arrangements have led UK Parliamentarians to denounce them as “immoral” and led to demands that the island change its laws.
Google said it follows tax rules in all the countries it operates in — and pays little tax in the UK became its profits are not generated by UK employees.
The UK arm of the firm, as well as other European operations, are designated as providers of marketing services to Google Ireland.
But Google declares little profit in Ireland because it sends nearly all the cash it gets to the Bermuda affiliate, in the form of licence fees for use of Google intellectual property.
The Westminster public accounts committee (PAC), however, has pointed out that the firm has advertised for sales people in the UK, despite Google’s insistence that it conducts no sales in Britain.
A PAC report last year accused Google of using “contrived” mechanisms to avoid tax and said the UK should close the loopholes.
Tax avoidance was earlier this year a major topic at both the G20 and G8 — and the pressure on offshore jurisdictions is likely to intensify as the western world continues to struggle with the financial problems of the global recession.
By: Raymond Hainey