Legislation that will create an agency to administer the collection of corporate income tax was passed in the House of Assembly on Friday. The Corporate Income Tax Agency Act 2024 will give the agency powers to ensure compliance and “prosecute any enforcement action” against businesses that fail to abide by the new regulations. A 15 per cent tax on profits of companies based in Bermuda with more than €750 million (about $808 million) of annual revenue will come into effect in January. According to David Burt, about 2,000 Bermudian-based multinationals will be affected by the new tax.
The agency will also be responsible for calculating and collecting the tax and providing support to companies that are liable for the tariff. During Friday’s debate, the Premier and Minister of Finance confirmed that the legislation was based on similar laws in Canada. He added that it had received widespread support from businesses and ratings agencies.
Governance and Oversight
The agency will be governed by a board of directors consisting of a chairman and between six and ten additional directors, who will be appointed by the Minister of Finance. A chief executive officer shall be responsible for the day-to-day management of the agency. Scott Pearman, the One Bermuda Alliance spokesman on legal affairs, said that the Opposition broadly supported the Bill. He said: “We in the OBA very much support the idea of an independent corporate income tax agency. To be fair, much of this Bill is very commendable.”
However, Mr Pearman raised some questions during the debate. He expressed concern that board members might not have enough independence to fulfil their duties and that they would be deprived of some financial information if it was classed as commercially confidential. He added: “It’s also about agency independence. There’ll be CEO and board and ministerial involvement – I said involvement, not interference. You don’t want taxpayer names passed about, but the board needs to have access to all information. If not, it’s not fully informed and it cannot perform its duties.”
If we’re going to impart faith in the CEO and the minister, it does seem odd that we’re not granting it to the board.” Mr Pearman noted that the board would likely be made up of “heavy hitters” who would “robustly” oversee the agency. “Bermuda must make sure these people are best and brightest,” he said.
Compliance and Penalties
Mr Pearman also expressed concern that firms that failed to comply with agency demands could be jailed. Officials will have the power to demand financial information from companies that could be penalised with a $100,000 fine and up to two years’ imprisonment if they failed to co-operate. Mr Pearman said: “Failing to provide information to the Government is not a crime and nor should it ever be.”
Mr Burt replied that the Bermuda Monetary Authority operated under similar rules and that “appropriate sanctions“ were needed to maintain standards and protect the island’s reputation. However, in an amendment to the Act, Mr Burt revealed that companies would only face prosecution if they failed to comply “without reasonable excuse”. Responding to concerns from Mr Pearman over ministerial involvement, Mr Burt said that the minister would only make decisions on the recommendation of the board.
He said: “Directions without question are common in agencies of this nature. Although this is an external agency, it is carrying out a very basic and important government function, which is the collection of taxes. It’s not ideal that it’s an external body, but it is being established to collect taxes on behalf of the Government of Bermuda.”
