A cruise can be both relaxing and informative. Mollie and I have been fortunate since our retirement to be able to afford a few cruises, including, just lately, to Bermuda, out of New York City where we sailed past Lady Liberty.
There has been something to see and learn on most of our cruises. The Canal in Panama was fascinating, a unique tribute to American engineering. In Alaska we saw the glaciers melting rapidly and marked the limits of their retreat. Quebec City has a gorgeous harbor and interesting culture. But what about Bermuda?
Located some 600 miles off our Eastern seaboard, about the Latitude of Charleston, SC, Bermuda is the site of Britain’s oldest and most populous remaining overseas territory. Wikipedia says this about it:
Bermuda has an affluent economy, with off-shore finance as its largest sector followed by tourism. In 2005, Bermuda was once even claimed to have the world’s highest GDP per capita, yet these statistics are hard to verify as Bermuda is not classified as a country but rather as a territory of the U.K.
Bermuda is, let’s be honest here, a dinky island, about 13 miles long and 3 miles wide at its widest. We sailed around it and its shoreline is virtually full of large houses with excellent ocean views. It is surrounded by numerous rocks and shoals and, unsurprisingly, is the site of many shipwrecks. There is no other land closer than 600 miles.
Originally a convenient naval base for whaling, privateering and merchant trading, it was a primary haven for the British Navy during the American Colonial unpleasantness and again during the War of 1812. It was also a convenient stop for Confederate blockade runners during the Civil War. But since those times its primary advantage appears to be – – isolation.
It has been a popular haven for the rich and famous for a long time. (Mollie and I were a little surprised to find most everything very expensive by ordinary standards. You might compare it to New York City.) Turns out though, it’s not what you see but what you don’t see that’s interesting. Bermuda is one of a number of places in the world that is very kind to corporations and rich people. There is no corporate income tax. A recent report, out just this month from the Greenling Institute, has interesting things to say. I offer the executive summary here:
- In 2010, U.S. corporations avoided approximately $60 billion in U.S. corporate income taxes by using a variety of devices and gimmicks to shift profits to foreign subsidiaries, while the Fortune 100 companies received some $89.6 billion in federal contracts.
- Since the Government Accountability Office reviewed this issue in 2008, top companies have added 44 new subsidiaries in countries identified by the GAO as tax havens.
- The lost revenue would be more than enough to fund the entire budgets of the Environmental Protection Agency and the Departments of Energy and Labor combined.
- One recent study found that eight of the top 12 companies effectively paid no federal income taxes from 2008 through 2010. In 2010, General Electric paid no federal income tax.
- The official U.S. corporate tax rate of 35 percent largely exists in name only. The U.S. collects less in corporate taxes as a share of GDP than 24 out of 26 industrialized countries.
- The share of the federal budget funded by corporate income taxes has dropped dramatically since the 1940s, from 28.8 percent of the budget to 10.3 percent.
- Of the 77 Fortune 100 companies with subsidiaries in tax haven countries, 69 had federal contracts. The largest in terms of dollar amounts was General Dynamics, with nearly $15 billion in federal contracts and 14 subsidiaries in tax haven or financial privacy jurisdictions.
- The pharmaceutical and tech sectors loom particularly large, including Merck, Pfizer, General Electric, Dell and Google. G.E., paying essentially no federal tax, had over $3 billion in federal contracts.
- Google’s “Double Irish Dutch Sandwich” illustrates the convoluted mechanisms used to hide profits overseas. Many other strategies are also used.
Surely I am not the only one who finds this information instructive regarding what is wrong with our tax system. Listening to GOP leaders one would think that poor corporate America is taxed to death, that the evil IRS job-killing tax-tentacles are draining our life blood. Hmm. Maybe not so much. For some information on specific companies taking advantage of Bermuda’s tax laxity, I found this LINK.
We planned our vacation simply based on the desire to see someplace new and enjoy the beautiful art, dining and facilities of a cruise ship. It was only coincidental that my curiosity about this quiet, remote little island caused me to research it. I asked myself, why would anyone want to live in such an isolated place? There are no attractions, only a few beaches, nowhere to visit. It is a place of large houses with ocean views, nice golf courses, a large airport, but ever so tiny and isolated. Now I know, and so do you.
Seeing Lady Liberty on our return I couldn’t help musing, are we now the land of huddled masses yearning to be tax free? When you turn over a rock, you never know what you’ll find, do you? Hmm. Cayman Islands, anyone?
- Corporate America Untaxed: Tax Avoidance on the Rise (taxprof.typepad.com)
- Bermuda celebrates 400th anniversary | British Airways – Travel Industry News (travelnews.britishairways.com)