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(Reuters) — Bermuda Premier David Burt on Tuesday called the European Union’s decision to put the British overseas territory on a list of global tax havens “a setback” but said he was confident it would soon be reversed.
“The news from Brussels this morning is a setback for Bermuda,” a grave-faced Mr. Burt told local journalists at a news conference, flanked by business leaders.
“Bermuda is compliant, and we are confident that within a matter of weeks that will be accepted by EU member states and Bermuda will be removed from this list,” he added.
The 28-nation EU set up the so-called blacklist in December 2017 after revelations of widespread tax avoidance schemes used by corporations and wealthy individuals to lower tax bills.
EU governments adopted a broadened blacklist of tax havens on Tuesday, adding 10 jurisdictions to the updated list. They are: Bermuda, the Dutch Caribbean island of Aruba, Barbados, Belize, Fiji, the Marshall Islands, Oman, the United Arab Emirates, Vanuatu and Dominica.
Blacklisted jurisdictions face reputational damage and stricter controls on their financial transactions with the EU, although no EU sanctions have yet been agreed by European states.
In an effort to meet an EU deadline, the self-governing island passed legislation in December that obliges companies domiciled in Bermuda to have a “substantial economic presence,” granting some firms a grace period for implementation.
While Britain had pushed other EU states not to include Bermuda on the list, it lifted its objections after the European Commission argued that the island has “been playing games” to dodge EU requirements, according to minutes of a meeting of EU envoys on the matter.
Mr. Burt rejected that assertion, saying the impression arose due to a “technical omission which was rectified in good time.”
Jurisdictions are added to the tax haven blacklist if they have shortfalls in their tax rules that could favor tax evasion in other states. They are removed from the blacklist if they commit to reforms by set deadlines.
Bermuda was required to change its tax rules by the end of February, but added new loopholes in revised legislation and did not provide a final text by the deadline, according to the commission.
Mr. Burt denied the deadline was missed and said its legislation was perceived by businesses as more stringent than other jurisdictions.
The north Atlantic island, which is also a major reinsurance hub, has far fewer companies on its registry than other British territories like the Cayman Islands and British Virgin Islands which have more than 100,000 each.
But Bermuda made headlines in recent months when documents filed at the Dutch Chamber of Commerce revealed that Google moved €19.9 billion ($22.7 billion) through a Dutch shell company to Bermuda in 2017 as part of an arrangement that allows it to reduce its foreign tax bill.
Asked whether Bermuda should consider banning Google, owned by Alphabet Inc., Finance Minister Curtis Dickinson said: “We would like to encourage Google to help us through this by establishing a more substantive presence in Bermuda.”
He added that Bermuda, which has already opened a government office in Brussels, will also send officials to Paris and Berlin in the coming weeks to defend the island’s position.
Insurance industry organizations have come down on opposing sides of proposed U.S. tax reforms that would close the so-called Bermuda tax loophole.