Tax Haven Bermuda and Beyond

A few days ago I pointed out that the Premier of the British overseas territory of Bermuda, the Honorable Dr. E.F. Brown MP, was playing the fool by falsely claiming that: "We are not a tax haven and not an environment of corporate inversions designed to allow any evasion of taxes."

Dr. Brown then went on to trumpet the huge financial importance of foreign insurance and re-insurance companies that have moved their operations to his tiny mid- Atlantic island. He noted that since Hurricane Katrina and the 9-11 terror attacks, "almost $25 billion in claims have been delivered from Bermuda to American policy holders. Perhaps even more impressive, $100 billion dollars of U.S. capital is invested in Bermuda; the overwhelming majority of that money is a result of the insurance and re-insurance industry."

OK Dr. Brown.....

Q: What brought this business to Bermuda?
A: Local laws that exempt corporations from taxes on profits, dividends and capital gains.

Bermuda's 0% rate of tax has lured many insurance companies to incorporate there after moving away from high-tax countries like the UK. Last year, Lloyds of London underwriting firms Hiscox and Omega set up companies in Bermuda, citing the UK's the 30% income tax and government burdensome regulations. They were followed in January 2007 by another Lloyds firm, Hardy Underwriting plc.

Not bad -- reducing a 30% tax to zero tax.

Bermuda is also the world leader in captive insurance companies. In 2006 there were 82 new Bermuda incorporations of foreign-owned "captive insurance" companies, adding to the more 5,000 already registered there. These captives allow U.S. companies and professional associations to reduce substantially the cost of malpractice and liability insurance by self-insuring, and it also makes them eligible for U.S. tax breaks available to qualifying insurance captives.

The Honorable Dr. Brown is right in one respect -- when he says Bermuda is not a base for tax evasion.

The use of foreign jurisdictions as a base for offshore business constitutes fully legal tax avoidance. Under the laws of both the U.K. and the U.S., corporations have the right to move their business wherever they please and international tax competition cuts their costs. Lower costs help consumers and raise profits and dividends for investors. It's called "free market economics."

Notwithstanding the legality of such smart business conduct, demagogic American politicians such as U.S. Senators Levin (D-MI) and Grassley (R-IO) constantly attack U.S. corporations who avail themselves of their legal rights by going offshore as somehow being "unpatriotic." Would-be president, Sen. Obama (D-ILL) has joined this farce by introducing legislation that would penalize American citizens and corporations who use offshore tax havens. (How about a law that penalizes Americans who invest in Illinois?)

It would be a miracle, but perhaps someday both Bermuda premiers and U.S. senators will speak the truth about tax havens -- but don't hold your breath.
-----
* I've authored a detailed study on captive insurance showing you exactly how it can save you money, cut taxes and allow lucrative investment of capital. Click here to read more about this special report.
LINK: http://web-purchases.com/190SCAPT/W190H716/

* Find out what the world's tax havens have to offer you; click here for information about the new edition of my book, Where to Stash Your Cash: Tax Havens of the World. 
LINK: http://web-purchases.com/190STHOW/W190H723/