The big break that our businesses have so longed for came wrapped up in all but Christmas wrapping paper just ahead of the season of giving as the Prime Minister delivered a massive corporate tax cut on Tuesday.
Imagine, then, the resounding echo of collective cheers across the business community. Consider, then, that a mission-crippling 25-30 per cent corporate tax rate will vanish into the thin air of one per cent and 5.5 per cent rates on taxable income. Expect, then, that any trepidation that business operators were experiencing as 2019 nears dissipated with the surprise announcement.
Indeed, entrepreneurs and enterprises really couldn’t ask for a better Christmas gift.
The about-turn in the country’s tax regime, Mottley explained, was driven by a promise given by the former Freundel Stuart administration to the self-appointed global tax watchdog, the Organization for Economic Cooperation and Development (OECD). The Promise – Barbados would dismantle the country’s 40-year tax regime, removing any distinction between domestic and international taxes by December 31.
The penalty for inaction was severe – international sanctions – and so Mottley said her Government opted to “turn another act that threatened to weaken the Barbados economy… into an opportunity.”
It’s an opportunity the private sector will doubtless grab with both hands and feet. No doubt CEOs, board chairpersons and Chief Financial Officers have already began to crunch the numbers even if just in their heads.
A pleased head of the Barbados Private Sector Association Edward Clarke told Barbados TODAY the move will deliver benefits to companies that could boost the economy.
Said Clarke, “Something like this I would expect to grow the economy; if companies have more money to invest through lower taxation it will certainly make investment a lot more attractive and once investments are attractive people are going to invest funds for future returns. So I think it is a very good thing for the Barbados economy.”
Noted economist Jeremy Stephen also suggested that not only would the island become an “attractive low tax jurisdiction” but there would be a rise in the Gross Domestic Product, and private companies would have more fiscal space to even absorb the workers being sent home by the Government.
But while the pundits, economists, and analysts weigh the benefits or harms of the measure, ordinary Barbadians who have been crying out for tax relief will no doubt ask themselves, what’s in it for me?
While delivering the good news Prime Minister Mottley insisted that consumers must benefit.
“With these new tax rates I lay down a challenge to domestic companies that there must be benefits to the country…. Barbadians will expect these benefits to be in the form of higher local investment, more enfranchisement of employees and better pay.”
It is not only fair but about time that business delivers.
Consumers who are yet to get any major relief from the high prices with the removal of the National Social Responsibility, (NSRL) will be watching closely, especially since workers will continue to pay high income tax rates while directors enjoy their tax cut.
The private sector is, after all, the engine of the economy – the business folk keep us reminding us so. And they trot out the well-worn mantra that Government is to facilitate profit-making, and be responsible for making sure most of the things that enable the economy continue to function – roads, airports, an educated workforce, and the like.
With this generous measure, the private sector must create new products and services; set up fresh innovative companies, and with them should come new jobs and new sources of income. Or will the tax cut merely fatten the pockets of owners and widen the income inequality gap in this nation?
The role of the private sector is even more critical today giving the state of the Barbados economy. So the extent to which the private sector can make the necessary investment, expand their operations and engage in innovation, then the Barbados economy will rebound and grow and everybody can benefit.
With these historic tax cuts, the Government may risk running out of revenue. Business has just run out of excuses.