Foreign Trade Minister Sandra Husbands wants a new strategy employed to persuade international business companies to be domiciled here – as the Government moves to change the law that ends the era of IBCs.
Husbands suggested that Barbados identify “new allies” as it carves out a new strategy and reposition itself to compete globally as a high-end services provider.
Husbands joined lawmakers on Friday to debate the repeal of the International Business Companies Act in Parliament – to abolish the distinction between domestic and international business companies (IBCs) and converge tax rates for local firms with the low rates for IBCs.
This, she said, is in response to her belief that international organizations were already planning to again shift the goal post on tax regime competition.
Husbands said it was critical that Barbados finds a way to continue to earn money globally from offshore business. Using a cricket analogy, she said there were three critical tasks ahead – checking the playing conditions, assessing the field and adjusting the strategy as the game proceeds.
“We have to first of all check the conditions. That is what you do when you go out on a cricket pitch. You check the conditions, how they have rolled the pitch and what is happening in the environment because that will determine how the ball will play,” she said.
“The second thing you have to do is check to see how the field is set up. That is going to determine how you are going to place your run. Then you adjust your strategy to suit those two things – condition, and how the field is set . . . . My main interest is in how as nations we are going to change our cricket game in the international arena of financial services so that we come out on top.”
A highlight of the bill is the overhaul of the corporation tax regime, which will result in both local and offshore companies paying the same tax rates of between one and 5.5 per cent.
“The reason we had to pursue tax convergence where we lowered the corporation tax was to be able to preserve our income coming from international business because there was no way that our [local] enterprises could literally triple or quadruple their growth within the two to three years to replace the revenue which we were earning from international business, and therefore we had to quickly move and use tax convergence,” said Husbands.
“We have to pursue a high-end services strategy, and the tax convergence strategy is just one movement in that overall high-end services strategy that Barbados is aiming for,” she told the House of Assembly.
The Minister said that should the country be able to attract companies through her proposed strategy, it would require more than just favourable tax rates.
“We are going after those enterprises
who don’t necessarily want a no-tax jurisdiction or one that will be easily blacklisted – that will be called into question – but a reputable jurisdiction, properly managed, properly monitored and scrutinized and compliant with all the things necessary internationally.
“We have got to offer them a jurisdiction that is well-run and well-managed and if we are going to succeed in our strategy then it is absolutely necessary that Barbados works and that Barbados works well,” said Husbands.
Barbados had been gaining only about $150 million annually from local corporation tax and between $300 million and $400 million per year from offshore business, the foreign trade minister said.