Created Date:
18 July 2022

Global tax initiatives – a Bermuda perspective

With governments' financial resources under increasing strain, Bermuda counsel Ashley Fife explores how this is impacting developments in international taxation and identifies those most pertinent to the global private wealth sector.

OECD's minimum global corporate tax

The most significant recent development in the arena of taxation internationally must be the Organisation for Economic Co-operation & Development's (the OECD) members' agreement in late 2021, to ensure that multinational enterprises (MNEs) with global revenue above EUR 750 million will be subject to a 15% tax rate. The regime has been developed following years of intensive negotiation aimed at combatting tax avoidance in a digitalised and globalised world. The OECD's aim is for its members to sign a multilateral agreement during 2022 providing for effective implementation of the regime in 2023.

The OECD intends that the initiative will effectively reallocate more than USD$125 billion of profits from around 100 of the world's largest and most profitable MNEs to countries worldwide, ensuring MNEs pay a fair share of tax wherever they operate and generate profits. The OECD considers this will be achieved by reallocating taxing rights over MNEs from their home countries to the markets where they operate and earn profits, regardless of whether the MNEs have a physical presence there and imposing a global minimum corporate rate of 15%.

IMF's call for higher taxes on the wealthy

During 2021, the International Monetary Fund (IMF) recommended governments consider levying higher taxes (particularly on property, capital gains and inheritance) on the income and wealth of the rich (at least on a temporary basis) to help pay for the enormous costs of tackling the Covid pandemic.

On the flipside, many governments, including Bermuda, appear to remain mindful of the potentially adverse impact that imposing new or higher taxes may have on their economies at a time when certain economic sectors have been significantly stifled by the pandemic. In Bermuda, the pandemic has had considerably less of a financial impact on the financial services sector than compared to the tourism or retail sectors, for example. However, the IMF, on the global front, projects GDP to return to its 2019 level by the end of 2022.

Stimulating Bermuda's economy

Many governments are carefully assessing the ongoing success of stimulus measures and need for relief measures and the extent that revenues may need to be supplemented by new or increased taxes.

Rather than focus on introducing new and higher taxes, many jurisdictions have focused on implementing measures to stimulate their economies and provide temporary relief measures to sectors and individuals most affected.

Bermuda has been able to attract people to the Island and consequently generated government fees, customs duties and other revenue during the crisis leveraging on several initiatives. For example, Bermuda introduced its "digital nomad visa" which enables persons to work remotely from Bermuda for an employer outside of Bermuda for a year (with the possibility of renewal). Bermuda's economic investment certificate (EIC) enables persons who make an upfront "qualifying investment" of $2,500,000 in Bermuda (including real estate and donations to Bermuda registered charities) to reside and seek employment in Bermuda for a period of five years. The EIC also enables the holder's spouse and dependents to reside in Bermuda during that time. The EIC holder also has the prospect of applying for a residential certificate (enabling the holder, spouse and dependents to reside in Bermuda indefinitely) upon the expiration of the EIC.

While the Bermuda Government has made some minor increases to stamp duties on real estate sales and payroll taxes, Bermuda has also provided payroll tax relief measures for certain businesses, decrease in transport infrastructure taxes (to relieve the tourism industry) and the ability of individuals to access levels of funds from certain regulated pension schemes before retirement.  

Wealth taxes & the growing rich/poor divide

The wealth of ultra HNWIs has increased significantly during the pandemic, exacerbating the gap between the rich and poor, concentrating huge amounts of capital among a very small group of people thereby perhaps even bringing into question whether capitalism is working effectively. This may have led to parts of society being prepared to support a form of wealth tax or other form of "robin hood" taxation.

Wealth taxes are controversial and unusual and may take several forms. There are varying views about whether a wealth tax is an efficient form of taxation. The OECD report in 2018 "The role and design of wealth taxes in the OECD" recognises they can harm risk-taking and entrepreneurship. Mirlees Review, published in 2011 by the Institute of Fiscal Studies in the UK rejected a wealth tax citing practical difficulties and a poor international experience stating: "It is costly to administer, might raise little revenue and could operate unfairly and inefficiently."

There is also a material distinction between an unheralded one-off wealth tax and ongoing wealth taxes. An unheralded wealth might be difficult for HNWIs to plan to avoid and thereby less likely to alter their behaviour - particularly if the rationale for the tax is widely accepted as being to fund appropriate causes and the government's claims that the tax is indeed a one-off are received as credible. There is certainly some history of "one-off" or "temporary" taxes being introduced and governments subsequently being seduced by and unwilling to give up the revenue stream. An ongoing wealth tax may lead to human and capital flight from the jurisdiction and (re)structuring in an attempt to avoid the tax.  Some countries have introduced ongoing wealth taxes only to repeal them due to a failure of the wealth tax to recover the revenue anticipated, high collection costs and unintended adverse economic consequences. For example, French Finance Minister Bruno LeMaire indicated the partial repeal of French wealth tax in 2018 was part of a reforms designed to attract more foreign investment.

What forms of taxation are most palatable?

Systems of taxation have evolved to meet the needs of particular economies and resources, and it is important to remember that a “global" tax of any nature will impact jurisdictions differently.

At the same time, we can see that attitudes are changing towards the obligation of wealth owners to pay taxes. As the world becomes more interconnected and interdependent, attitudes are also changing regarding the responsible stewardship of wealth - including the manner that businesses operate and how HNWIs invest to address social, environmental and other issues.  Historically, these issues may have been regarded as the responsibility of government.  Wealth owners with philanthropic commitments may also contribute to meet social needs.  However, to what extent should unelected private individuals perform this role rather than pay higher taxes enabling governments to do so?

The world has witnessed changes to tax laws and reporting requirements for a few years before the pandemic that are impacting the succession structures put in place.  For instance, beneficial ownership registries illustrate a move toward greater transparency to ensure assets are taxed.

The approach that governments take to taxation is critical.  Firstly, they need to acknowledge the contributions that wealth owners make to their economies as business owners and that it is important to create a tax system that is predictable and don’t deter economic activity.

Governments should strive to put into place tax systems that are insofar as possible widely regarded as simple, fair and provide certainty.  Important questions for governments to consider include: What types of taxes are being collected and what are the demographics of those paying the lion share of them? How much revenue is each type of tax generating? How efficient is the implementation, reporting and collection process in respect of the particular tax?

Simply increasing headline tax rates may not be widely accepted as being fair. In determining what constitutes a "fair tax system", perhaps distinction should be drawn between earned income and passive income.  Is it equitable for someone who has worked hard to earn a living to be taxed on their earned income at a top headline rate when someone who lives off passive income (potentially on wealth that they were not responsible for creating) pays significantly less tax on their income?

In respect of wealth taxes, important questions for governments may include: Should they be one-off or ongoing? Should they only apply in respect of certain assets? Should they only be imposed on the uber-rich or should they apply on lower levels of wealth? The wealth tax thresholds in Spain, France, Norway and Colombia for example seem surprisingly low and would likely capture many persons that might be regarded as middle-class as well as ultra HNWIs.

Governments need to be mindful of the risk of double taxation that might arise if they introduce additional taxes, such as wealth taxes, otherwise such taxes might be less likely to be widely regarded as fair or credible.

There do not appear to be discussions or plans for any form of wealth tax to be introduced in Bermuda.


In the near term, it is likely that international initiatives will continue with exponential momentum with the view of ensuring accurate tax reporting, transparency of ownership, collection of tax revenue and effective regimes of imposing tax in attempts to replenish government coffers. Bermuda, as a leading jurisdiction for private wealth structures and financial services generally, will need to continue to be pragmatic as adapts to the impact of global tax and reporting initiatives.


Ashley Fife wrote this article with the valuable contribution of Gina Pereira, co-managing director of Meritus Trust Company LimitedAn original version of this article was first published by Asian Business Law Journal, May 2022. 

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