Will Bermuda be Trumped?
About Jeremy Leese
Jeremy’s practice focuses on corporate finance, mergers and acquisitions, corporate reorganisations and restructurings, banking and international real estate finance, structured finance, as well as regulatory and legislative compliance.
Jeremy Leese’s full profile on mjm.bm.
As I sat in my hotel room in New York in the early hours of Wednesday, 9th November 2016, having been awoken from my slumber by the screaming and cheering from across the road at the Hilton’s Trump Election Party, my first thought was that the world in which we live will most certainly change once President-Elect Trump vacates his golden palace for a White House early in the new year.
Change for sure, but for the better? And, if so, who is most likely to benefit? Much closer to home, what does it mean for us here in Bermuda?
It is hard to be definitive on the possible effect of Mr. Trump’s policies on Bermuda, and the offshore world generally, as so few have been laid out in any detail and there is a paradox at the very heart of his future presidency. He espouses a challenge to the maintenance of offshore accounts by American corporations, yet he has personally invested in many of the companies that do so. He also seems to have taken advantage of every tax loophole available in his own business dealings over the years to pay the minimum amount of tax he is legally obliged to pay. As Mr. Trump explained to supporters on the campaign trail earlier this year, when it comes to his own business enterprises, “I pay as little as possible. I use every single thing in the book.” He famously refused to disclose his own tax returns. He is a veteran of the business world, the world in which offshore financial centres are used on a regular basis in multi-jurisdictional transactions.
Nevertheless one of the key planks in Mr. Trump’s economic platform is the “repatriation” of American corporations, and their potential tax revenue. Basically, by revising the U.S. tax code and offering certain incentives, Mr. Trump would seek to bring those American companies and their earnings back to the United States. That sort of philosophy, of course, is bad news for jurisdictions such as the Cayman Islands, which is in the business of keeping such money parked securely offshore. Bermuda is not, and never has been, a real player in that market. We do not have “brass plate” banks and financial institutions, with a heavily regulated banking industry being very careful as to the sources of funds and the types of customer we welcome. Anyone who has recently tried to open a bank account at one of Hamilton’s banks will know it is no easy task these days with the anti-money laundering, know your client, due diligence almost oppressive in its thoroughness.
We also have an economy which has a substantial on-island pillar in the insurance and reinsurance business – a legitimate local industry which proves invaluable globally day to day as well as when disaster (such as Hurricane Katrina) strikes.
Of course, it would be foolhardy to say that the policies laid out by the President of the United States of America do not affect Bermuda. We lie but a few hundred miles off the coast of the Carolinas and our economy is closely linked with the United States. We must do everything we can to ensure that relations remain cordial and positive in order to support our tourism and international financial business sectors. We must hope that his election agenda to introduce policies that support economic growth and fair trade that is intended to lead to an increase in the wealth and disposable income of Americans bears fruit. In turn, we can seek to encourage these very people to visit Bermuda on cruises, on vacations, to buy high end real estate, to bolster our recovering tourism industry.
The protests that I witnessed first-hand on the streets of New York on the day after the election were very real in their animosity towards the President-Elect and he will have many challenges to overcome as his Presidency takes shape. Will the likes of Bermuda feature heavily in his thinking? I would suggest not, at least in the short-term, but it may be that there are knock-on effects, both good and bad, some possibly unintended, from his policies which could impact us here in the Mid-Atlantic. It is for our government and business community to stand tall and continue to strive to get across the message about the advantages and uses of Bermuda as a vibrant international financial centre, the benefits of a vacation or investment in our paradise isle and the value of our contribution to the vitality and success of business enterprises globally.