Recent proposals by senate Democrat for Montana, Max Baucus to impose a one-off 20 percent tax held offshore by US multinationals are unlikely to affect captives or make it further than a gridlocked Capitol Hill.
That is the view of Bill Storie, a veteran of the Bermuda market, who said that while a potential issue for some US companies, it is not solely directed at offshore domiciles or captives insurers, although the development is nevertheless “serious enough to consider”.
Rather the measure is “simply a hunt for the gold; wherever it may be”, one that extends beyond just insurers.
Storie said that the move by Baucus is the latest in a litany of measures aimed at generating tax revenues for the US Treasury, but said that captives have little to fear. He said that captives have faced similar overtures for decades, adding that the measure—even if passed—is unlikely to encourage any great migration onshore or shut down entities entitled to those tax benefits that are a feature of offshore jurisdictions.
Storie said that the measure instead reflects the ongoing battle between Democrats and Republicans on Capitol Hill over budgetary spending, with both sides continuing to settle scores following the closure of the US government in October. He explained that the measure ties in with Democrat efforts to maintain spending on entitlements, while looking for new, risk-free sources of revenue. The measure is likely to face opposition from Republicans however; who may yet derail Baucus’ plans.
Baucus’ measure appears to be an effort to kick-start discussions around changing the US tax code, but political hostility in Washington looks set to at least delay, or more probably derail, the one-off tax.
US, tax, captive insurance, offshore