Bermuda pro-offshore campaign continues: “International Business owes Bermudians absolutely nothing”

Earlier this year the offshore financial sector in Bermuda launched a campaign called “Everybody’s Business” which aims to “educate Bermudians about the importance of international business to all sectors of the community”, and is sponsored by PriceWaterHouseCoopers and the Bermuda Business Development Agency. (“International business” is a euphemism for offshore finance.)

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Bermuda news: signs of resistance to the Finance Curse?

In Bermuda there are signs that politics may be trying to reassert itself over finance, according to a recent article in the Royal Gazette:

“Bankers have declined an opportunity to reply to an attack by Finance Minister Bob Richards on their lending and interest policies as a drag on Bermuda’s recovery from recession.”

The Minister said that the banks were “at odds with Bermuda’s national economic interests.”

“Mr Richards highlighted that the banking sector provided “ultra-easy” credit during the boom years — but resorted to “debilitating, ultra-cautious lending during economic weakness.”

“We have stated repeatedly that in order for Bermuda to move forward, all oars must be pulling in the same direction.”

He added: “Attaining such forward momentum is much more difficult to achieve when such an important economic driver as the banking sector is pulling in the wrong direction.”

“Bermuda Bankers’ Association chief Brendan McDonagh, the chairman and CEO of the Bank of Butterfield, refused to comment.”

There is also interesting debate in the comments to this and related articles. For example a commenter called “Buggy FunBunny” asks:

“And how, exactly, does engaging in a race to the bottom, i.e. ceding ever more moolah to faux corporations, help Bermuda?”

For context, Bermuda’s economy has not grown in five years and youth unemployment is at 36 percent. Please see the Tax Justice Network for more analysis of the Finance Curse.

At the same time, the offshore financial sector in Bermuda continues to actively promote itself. At a recent conference a UK expert on trusts told the audience that Bermuda is “well-placed to attract Chinese super-rich”. Meanwhile, an upcoming seminar on compliance will host the former CFO of Enron – who was jailed for six years following Enron’s collapse – as a keynote speaker. Andrew Fastow will “make observations about how the ambiguity and complexity of laws and regulations breeds opportunity for problematic decisions and will discuss what questions corporate directors, management, attorneys, and accountants should ask in order to ensure that their companies not only follow the rules, but uphold the principles behind them.”

Barbados: Two weeks before the G20 summit, offshore state capture still alive and well

In his latest book the Finance Curse, Nick Shaxson shows how the financial services industry – often led by the big 4 accounting firms – captures the state in small jurisdictions with large offshore sectors.

As mentioned in yesterday’s blogpost, the government of Barbados this week presented an economic plan in which promotion of the country’s offshore sector features prominently. The summary of the plan was provided by KPMG, followed by a breakfast meeting at which the local PWC director of tax and legal services said that the “measures show promise“.

In less than two weeks, the G20 will be meeting again in St Petersburg: its priorities for 2013 include strengthening financial regulation. In the meantime, the OECD is proposing a new action plan for international taxation.

But do the G20 countries and international organizations really have enough leverage (not to mention moral authority, given that several major tax havens are in G20 countries) to impose policy changes on 70+ secrecy jurisdictions around the world?

As Jason Sharman of Griffith University says in this week’s edition of the Economist: “The idea of becoming tax haven “will always loom large” for small states with few other options for economic development”. Despite some recent advances in response to international pressure, the Barbados example shows that offshore decisions are still to a large extent driven by local politics. And that offshore local politics are still dominated by big finance.