Government’s decision to make Barbados a low-tax jurisdiction across the board will not go down in history as a make-or-break moment for Barbados’ economic sustainability, Prime Minister Mia Mottley has assured.
As a matter of fact, she has predicted that based on global business trends, in the future Government will be significantly less dependent on corporation tax for survival.
Mottley suggested that Barbados was positioning itself to be weaned from the fast-becoming antiquated system of revenue collection.
“The truth is that corporation taxes will become something that is going to be less and less relevant to a Government’s capacity to survive. This is because of the fluidity and mobility of companies globally. We are moving towards actual objects and services that are capable of being taxed at point of delivery or point of sale. So Barbados is on the cutting edge of where we intend to go with our development,” she said this morning as she delivered the feature address at the 22nd annual conference of the Barbados Association of Office Professionals at the Lloyd Erskine Sandiford Centre.
In outlining the new tax system last November, Mottley said the scheduled taxes would be “revenue neutral”, while outlining that the adjustments would make Barbados compliant with the Organisation for Economic Cooperation and Development (OECD), the club of the world’s wealthiest nations.
This morning, the Prime Minister again painted a picture of Barbados being backed into a corner by external forces.
“We had a problem with the fact that the rest of the developed world didn’t like that too many of these countries in the region were doing too well with respect to international financial service. Like bullies in the schoolyard, they blacklist and point at you and say ‘enough is enough’, such that those who hear the commotion don’t come to find out the real story but assume that you are a pariah, and [are inclined] to go the other way,” she said, noting that the only way to ward off such threats was to reposition the corporate sector.
The decision to abolish the 30 per cent tax previously paid by Barbadian firms and placing them in the same category as offshore companies which pay 5.5 per cent, has left several economic pundits questioning how Government will make up the shortfall.
Last November, Carlos Forte, a former Central Bank of Barbados official who emigrated to Canada, predicted that Government’s massive corporate tax cut would lead to a higher cost of living for Barbadians, as a shrinking tax base would foist even more burden on the citizenry.
“My expectation would be that the new imposition of taxes to come would translate into increased cost to Barbadian consumers, and essentially translate into a higher cost of living, which is already high in Barbados. It is likely to result in a more regressive form of taxation as opposed to a progressive form of taxation where, in the context of income taxes, those who earn more pay more,” Forte said at the time.