This seems to be much of a replay of the Panama Papers. But I have to say that, in terms of respectability of jurisdictions and their standing in the financial world, Bermuda and Panama are not, and have never been, in the same league.
Bermuda has never been one of the so-called Caribbean tax havens (it is not even located in the Caribbean) and it is a very well regulated and sophisticated financial jurisdiction. In fact, today Bermuda is the second largest reinsurance market in the world.
The journalists have been quick, and correctly so, to point out that merely because the names of individuals and companies appear on the lists, does not mean that they have done anything illegal. But that has not then stopped them from naming those individuals and companies, and the mere fact that they have been named already raises the possibility of taint.
Avoidance vs ethics & morality
Again, journalists acknowledge that it is quite legal to engage in tax avoidance, but then raise issues as to the ethics and morality of the tax avoidance.
This is not an easy subject to debate. Either what one is doing is legal or it is not. And if it is legal, then that should be the end of the matter, and no company or person should need to justify what it or he or she has done.
If any Government does not like how the law is working out, it is free to change the law. As one judge in an English case famously said, the doors of Parliament are open every year to the Commissioner to seek to amend the law.
And when a Government or NGO or journalist raises the question of ethics and morality by a taxpayer, one starts travelling along a very rocky road. In every country of the world tax is governed by a statute passed by the legislature.
Interpretation of that statute is a legal question based on the relevant facts and circumstances.
Whether or not tax is payable or not payable is entirely a question of law based on the facts. The minute one starts introducing, what I might call, qualitative or soft issues such as ethics and morality, one opens the door to the taxpayer raising the same issues.
For example, in one case an NGO criticised an investor for structuring its affairs such that it avoided withholding tax in a particular country in Africa and the NGO commented that the tax avoided could be compared to the amount of aid given to that country, implying that but for the avoidance, there might not have been the need to grant the aid.
The taxpayer might have responded that in that particular country the governance is not what it might be, the human rights record is not of the best, the level of corruption and wasteful expenditure leaves much to be desired, and if those elements were not present, there would not be the need for aid either. And why should a foreigner contribute to the tax coffers only for it to be looted by corrupt politicians?
It is totally unacceptable for a taxpayer to base its calculation of its tax liability on such qualitative or soft issues such as the extent of corruption or the human rights record of the relevant country. The only possible and correct basis to determine the tax liability is based on the statute and the law as interpreted by the courts. And if that is to be expected of the taxpayer, and rightly so, then that must be expected of others as well.
Shroud of secrecy
Moreover, the idea that these island economies such as Bermuda, Jersey, Guernsey, Isle of Man, and so on, are tax havens in the traditional sense, where transactions are shrouded in secrecy, is an outdated concept.
This was certainly true up until not so long ago, but today that is no longer the case.
Most of these are now highly regulated and there is a great deal of transparency, especially as regards tax affairs. Commencing this year there will be the automatic exchange of information among most countries in the world who have signed up to the Common Reporting Standards where financial institutions will report investment details to their local tax authorities, who will then report those details to the tax authorities of the country of residence of the investor.
So if a South African resident has a bank account (or a trust with a bank account) in Jersey or Guernsey or Switzerland, that information will be exchanged and brought to the attention of SARS (or the tax authorities in the UK or France or Germany, or wherever). To suggest that hiding money in these jurisdictions is to rely on secrecy, is simply no longer a correct perception.