Bermuda’s finance minister has slammed the OECD’s move to crack down on low tax offshore jurisdictions, saying such efforts could result in a global recession “greater than that of 2008”.
As reported, the OECD is following up on the US’s FATCA initiative with an international, automatic, multiparty information exchange network it is calling the Common Reporting Standard framework, the first 50-plus signatories to which are supposedly collecting information now, for filing in 2017.
In a budget statement on Friday, the finance minister, E.T. Richards said the bad rap “tax havens” like Bermuda are increasingly getting is “biased and ill-informed”, and causes “unwarranted reputational harm”.
He said the “feeding frenzy for the tax dollars of multinationals is replete with double standards” because places like Nevada, Delaware and the City of London could also be describes as tax havens.
He then made the following prediction about the economic effects of getting rid of tax havens:
“The irony of all of this is that if the OECD eventually gets what it wants, the consequences will likely be catastrophic to the very same economies they represent.”
He went on: “If those trillions of dollars (yes trillions!) of allegedly unpaid taxes are actually collected, multinationals – the very engines that create all those jobs and wealth 13 across the globe – will be severely damaged.
“Corporate earnings will plunge, stock prices will collapse, unemployment will soar and pension funds that depend on those stock prices will become impaired. A global recession greater than that of 2008 will likely be precipitated, and Bermuda will be sucked down that vortex. This is a classic case of having to be careful what you wish for.”
The global crackdown on corporate tax avoidance is already being felt by offshore jurisdictions. Earlier this month Standard & Poor’s downgraded the credit ratings of Jersey and Guernsey from AA+ to AA, and placed them both on a negative outlook, saying the global focus on tax avoidance was putting the two jurisdictions’ economic model at risk.
“We have growing concerns that increasing regulatory complexity and demands, amid the G10’s rising focus on low-tax regimes, will put pressure on [Jersey’s and Guernsey’s] financial services economy and low-tax regime,” S&P said.