The Upper Chamber of Parliament was strongly urged today to treat the passing of a suite of international business-related legislation currently before it as an emergency.
The call was made by Dr Jerome Walcott, Leader of Government Business in the Senate as he opened debate on a long list of inter-related bills that must be approved by December 31 as required by the Organization for Economic Cooperation and Development (OECD). This came amid concerns from Opposition Senator Caswell Franklyn that he was not in a position to intelligently debate the matters before the Chamber because of his last-minute receipt of the documents.
But while apologizing to Senator Franklyn for the late receipt, Dr Walcott explained that Government was pressed for time in having the proposed pieces of legislation completed by the deadline.
“Mr President I first want to apologize to the Honorable Leader of the Opposition in the Senate in terms of his receiving the late notice of these Bills. However, I want to inform him that we started a few minutes late this morning because all of us were waiting for the supplementary Order Paper to be completed.
“He (Franklyn) mentioned in his statement that he understands the matter, the importance, the time limits, the burden that has been placed on the Government in terms of this matter. They need to be completed by the 31st of December. It is almost like an emergency situation,” said Dr Walcott, who is Minister of Foreign Affairs and Foreign Trade.
The International Companies (Repeal) Bill 2018 – the first of 18 measures which were up for discussion today – was introduced by Dr Walcott as the Government pushed to ensure compliance with respect to its tax regime to avoid being black-listed by the powerful OECD as a haven for harmful taxation or tax avoidance.
He noted that the organization had created 15 action points, four of which were considered to be baseline and necessary for all countries to be compliant. The Government minister said that one action speaks to countering harmful tax practices in regards to preferential taxation.
He said another action point speaks to treaty abuse where business entities indulge in treaty shopping by looking around for the best deal. The Leader of Government Business said a third action has to do with country-by-country reporting which requires states to provide information on multilateral entities or enterprises in their territories in relation to their assets and the taxes paid by their staff.
He noted that the fourth one deals with a mutual agreement procedure that addresses any existence of conflict.
“Countries are therefore expected to be involved in the exchange of financial information, the EOIR on request, the AEOI, which is the automatic exchange of information and of course this multilateral convention,” Senator Walcott told the Upper Chamber.
It was his view that countries like Barbados have to work along with the OECD to rectify so-called weaknesses in the tax system. “The correction of these so-called weakneses will improve the revenue-affecting taxation into these OECD countries,” he added.
Dr Walcott recalled that because Barbados was physically absent from the OECD’s Forum on Harmful Taxation Practices in Paris, France to defend its review, eight of this country’s international business regimes were deemed to be potentially harmful when the report was published on October 16, 2017.
“And we were advised that we needed to sort this out by December 31, 2018 or we also will be blacklisted. The blacklisting is as dreadful as it sounds. It means, that once you are blacklisted, no business in your country can deal with any business in any of the member-countries of the OECD…so it essentially carves you out of the way,” he explained.
Senator Walcott said that while the former Government had committed this country to meeting the December 31, 2018 deadline, no plan was put in place regarding how this would be achieved.
He said the Barbados International Business Association (BIBA) was forced to step in and put a task force in place in March this year to examine how they could remedy the situation and develop a plan for the island to salvage the situation.
“So this review was done and it was presented to the Government in July this year. Since then, there have been numerous discussions, there have been seminars and we have been discussing the proposals which were put forward by BIBA,” he said.
According to him, the OECD found that the locally-based international business companies were not conducting businesses in Barbados and that while the offshore firms were paying as low as 2.5 per cent in corporation taxes, domestic firms paid as high as 30 per cent which was considered by the OECD as “potentially harmful”, Minister Walcott told the Senate.
He said that as a result, Government has included in new legislation a substantial cut in the corporation tax to be paid by local companies to between one per cent and 5.5 per cent.