OECD issues being fixed

Officials in the global business sector are being assured that all issues that could hinder Barbados’ chance of receiving a passing grade from the Organisation for Economic Cooperation and Development (OECD) as it relates to the exchange of information have been addressed.

This assurance has come from Minister of Business Development Kerrie Symmonds, as he spoke during a Barbados International Business Association (BIBA) business luncheon on Wednesday at the Savannah Beach Club.

Providing an update to the industry officials, Symmonds said a critical piece of the puzzle had been implemented and the necessary exchange of information was already taking place.

“The OECD, our friends, had given us a very clear indication that we would incur their displeasure if 2019 assessments had not been completed by the end of September 2022 and 2020 assessments completed by December 31st 2022. I want to say that all issues that could potentially hamper the effective assessments and exchanges of information have been treated to,” said Symmonds.

“The electronic reporting platform that was essential, is now in place and the economic substance reporting process has begun,” he said.

Based on OECD rules, Barbados implemented economic substance legislation in 2019, governing a range of categories of financial and other service activities, requiring resident entities to file an economic substance declaration annually in the prescribed form on the self-reporting portal.

The Barbados Companies (Economic Substance) Act aims to address concerns that entities could be used to artificially attract profits that are not in line with economic activities and substantial economic presence on the island.

As such, it requires certain entities to demonstrate that they have economic substance in the island by meeting certain reporting requirements. This may require the sharing of information between Barbados and other jurisdictions.

Symmonds told the BIBA gathering that the Barbados Revenue Authority (BRA) had started “notifying partner jurisdictions who have opted into the process, with respect to those entities that might have failed”.

However, he indicated: “While we have about 1,600 relevant declarations, that are companies that would be relevant for the process of reporting and exchange of information, we hardly have any that are in a position of failure.”

This, he said, meant “we are doing well in terms of keeping our reputation as being a very clean and desirable jurisdiction with which to do business”.

The last time Barbados was penalized by the OECD Global Forum was in March 2020, when it was considered “partially compliant” for failing to implement three essential elements of the OECD’s standard within a certain timeframe.

Barbados was required to implement a number of changes to its tax exchange framework between July 2015 and June 2018 in order to be fully compliant with the OECD Global Forum, but did not complete those changes until December 2019.

During his update on issues affecting the global business sector, Symmonds also touched on the issue of the proposed global minimum tax rate of 15 per cent, which is expected to take effect some time next year.

Responding to a question from the audience, the business development minister gave the assurance that Barbados would ensure that it had a seat at the table for the discussion on implementation. He noted that lawmakers will not be rushing to make changes to the local corporate tax rates, which is currently set at between 1 and 5.5 per cent based on earnings.

“You can be assured that we are going to have a place at the table and we are going to be aiming for a consensual approach on the way forward,” said Symmonds.

“It is for us to watch and be vigilant and be very ready to be at the table to have the necessary consultations to be a leader in trying to shape consensus. But in the interim, we continue in the way that we are going.”

The powerful G7 bloc is pushing for the establishment of a global corporate tax rate of 15 per cent, which it says is designed to ensure that big businesses pay their fair share of taxes.

Barbados is a signatory to the new agreement, which officials are aiming to implement by early 2023, but are yet to decide on how it should be implemented. (MM)