Why Stanley Works is no loss to Bermuda
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|Cathy Duffy |

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Insurance Issues by Cathy Duffy
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Some are reacting to the Stanley Works decision to remain in the US as if it was really bad news for Bermuda.
The decision may do more good for Bermuda than bad. With Stanley Works making the decision to stay in Connecticut, the pressure will finally be off Bermuda. Now we can go about doing what we do best - providing an infrastructure that does not strangle business.
The US politicians who fought for this Patriot Tax issue can now move on to something else. Stanley Works to the politicians was more about winning the battle and not about winning the war. These politicians were using patriotism as a means to political gain without taking into consideration the long term effects this bill will have on their own fragile economy. It would be interesting to see how much tax each one of the politicians, who was pushing this whole patriot tax deal, actually pays to the US government. It would be interesting to see how many tax shelters each has to prevent paying a minimum of 30 percent of his income to the US government.
Instead of placing so much emphasis on the laws of other countries, maybe it's time those countries that have income tax look at the way they collect taxes. Heavily taxed societies force people and businesses to look for ways to "cheat" the tax man. As Leona Hemsley pointed out when she was caught for tax evasion: "It's only the little people that pay taxes."
Instead of feeling like the international business industry is doomed in Bermuda as a result of Stanley Works being pressured by politicians to remain in Connecticut, we should be rejoicing. The losers in this political game are ultimately going to be Stanley Works when it finds it is no longer competitive with global companies who are not taxed on non-US income, the workers who will be out of jobs because Stanley Works will have to cut staff to remain competitive, the economy in Connecticut because unemployed people can't spend money they don't have and the US government who will lose income tax from the employees that lose their jobs and they will have to pay unemployment benefits to the people who could have remained in jobs.
Bermuda does not lose because the only reason Stanley Works wanted to reincorporate here was for tax reasons. Without a physical presence, the only people who would have benefited would have been the lawyers drafting the paper work and keeping the books for the company. Stanley Works would have been a true post office box as is so regularly written up in newspapers around the world.
What most Americans are not seeing are the deals that are being done under the table which will ultimately lose more taxes for the US economy than if Stanley Works would have reincorporated in Bermuda. The July 17, 2002 New York Times edition ran an article by David Cay Johnston called, "Bill Closing Bermuda Loophole Also includes Tax breaks". Cay says, "The bill would also create two permanent tax breaks that combined are worth $60.8 billion, nearly ten times the size of the so-called Bermuda loophole. These new loopholes tilt incentives in favour of American multinationals investing overseas rather than at home, critics and even some supporters of the bill said. Many speculate that the new bill will encourage companies to "move production and services overseas, costing Americans their jobs."
Speaking to average Americans about Stanley Works, I learned they were under the impression that Stanley Works was going to move its manufacturing operations out of Connecticut to Bermuda. They did not realise that it was merely a case of setting up a post office box to save taxes so Stanley Works could remain competitive globally. What will happen when Stanley Works starts moving more of its production to say Taiwan or China where it can operate more efficiently and Stanley begins to hire the local people there because it is much cheaper to do so? What jobs will people in Connecticut have then? What picture of Stanley Works will be painted then? Or will there be no mention of Stanley Works moving its production? After all it would still be an American company on paper despite the majority of its manufacturing and jobs being moved overseas.
Bermuda has not lost out by Stanley Works choosing to remain in the US. It has actually done us a favour because the US politicians will now move on to their next target. We can finally go about attracting companies that will add value to our economy by choosing to come here not just for tax reasons but because they feel they can operate more effectively and efficiently.
We're tired of being called a tax haven anyway. We're much more than that. We are an infrastructure which has not become overburdened with government red tape and interference. And as Bala Nadarajah [Director - Bermuda Monetary Authority] says, "our government process is not a "catch-me-if-you-can" type of regulation, rather the emphasis is on self disclosure."
Companies that choose us because we can help them with their global expansion will still come here. Companies wanting us for tax reasons may have to think otherwise.
What the US politicians need to be careful of is not adding to the woes of their deteriorating economy by forcing their companies to become noncompetitive with the rest of the world. According to the July 31 edition of the Economist: "New data suggest that America's recession last year was worse, and its recovery this year is weaker than previously thought." Some of their biggest companies have been destroyed over the last year in accounting scandals and people are already out of jobs. Instead of pushing patriotism for political gain, politicians should be helping their companies to be as competitive as they can so that they can pull through this very tough time in the global economy.