As the Freundel Stuart administration struggles to collect more than a billion owed to it in taxes, one international tax expert based in Barbados is warning of the need for a clear tax structure that is based on integrity.
PricewaterhouseCoopers (PwC) Tax and Legal Services Leader for the Caribbean David Prestwich warned that although companies wanted to pay their fair share of taxes, they were less likely to do so if the systems implemented were not transparent.
He argued that it was easier for companies to plan when there was certainty in relation to how their taxes were being used and what changes were likely to be made within a year or two of them being introduced.
“Companies feel more comfortable having a clear tax system to work around [and] if it is equally clear where that money is going in the economy that they are working in,” Prestwich said.
“Companies can deal with anything better than uncertainty in my experience. Boardrooms can deal with anything apart from a big piece of uncertainty and Lord knows if tax is anything at the minute, it is uncertain. We have got a whole host of uncertainty everywhere, both in terms of how Government raises tax [and] what the global financial climate says about tax and how laws are imposed on countries like Barbados,” he added.
Despite the recent use of tax amnesties, Government has repeatedly complained that companies and individuals were not paying their fair share of taxes.
Though not sure what measures were currently in place domestically to catch tax dodgers, Prestwich suggested that by implementing simple systems Government was likely to “catch 80 or 90 per cent” of tax offenders.
“There is the draconian example where in Greece for a short time the government put the tax collection responsibility entirely in the hands of the energy company. So people were having their electricity cut off if they weren’t paying their taxes.
“The UK introduced laws a few years ago whereby if you are doing anything contentious when it comes to tax paying, you now pay the tax upfront and then fight it through the courts. So the government gets all the benefit of the cash flow. So little tricks like that can be done,” he suggested.
Highlighting the importance of companies meeting their tax obligations, the tax restructuring expert told Barbados TODAY taxes were necessary for the provision of the social services the country now enjoys.
However, Prestwich said the relationship between companies and the country when it came to taxes should be a symbiotic one.
“So if you want to have a robust tax system which is based upon integrity in principles, that is going to start with the Government being able to build a trust in the society by saying if [there] is tax due either way we are going to either pursue it if it is due to us, but we pay it if it is due to the companies,” he advised.
Prestwich was speaking on the sidelines of a welcome reception at which he was officially introduced to members of international business financial services sector.
During his address, he warned of the need for companies here to brace for more changes to international tax structures, saying issues of tax compliance were likely to remain on the agenda “for a while”.
At the same time Prestwich has given Barbados a vote of confidence, saying he believes the country was “well positioned for that future when it comes to tax”.
However, PwC East Caribbean Territory Leader Michael Bynoe suggested that Barbados and the wider region were really at a crossroads when it came to international tax laws.
“The road ahead would be rough,” he said, adding that “we can either be satisfied with business as usual both within public and private sector, and possibly stagnate, or we can seek new ways of doing business and introduce new practices in order that we may grow and prosper.”
“I feel sometimes we are becoming complacent and we seem evermore willing to settle for less than the best and even sometimes for the unacceptable. We need to be bold, be innovative, be risk takers and be passionate about the development of our businesses, our communities and our country,” he added.