Governor of the Central Bank of Barbados Cleviston Haynes is confident that the island’s international business sector will return to its glory days of contributing significantly more to the local economy.
The sector was said to be contributing in excess of $800 million annually to the island’s gross domestic product behind that of the tourism sector, before plummeting to less than half that amount, following major changes to Canadian tax laws just over five years ago.
However, the Government has taken several steps to ensure the sector rebound. And Haynes told Barbados TODAY in a recent interview that he was optimistic, improvements were on the way.
“We believe that the international business sector will recover,” he said, as he pointed to several measures undertaken by local authorities in that regard.
Late last year Government announced sweeping changes to its tax regime in an attempt to become more compliant with the Organisation for Economic Corporation and Development (OECD) Forum on Harmful Tax Practices (FHTP) among other things.
At the time the OECD had explained that a number of Barbados’ tax regimes were deemed potentially harmful and that there was a level of “ring fencing” since domestic taxpayers were being treated differently from international companies.
As a result, the island abolished and amended parts of its international business regime.
At the beginning of January this year, both local and international businesses have been subjected to the same corporate tax rate on a sliding scale from one per cent to 5.5 per cent, depending on the level of taxable income.
Haynes told Barbados TODAY the restructuring of the corporate tax rate was designed to somewhat “increase reliance on the international business sector for our corporate tax revenue”, though he acknowledged that the new rates would not compensate for what would be lost on the domestic side.
Before being placed on the same sliding scale of up to five per cent, domestic rates were as high as 25 per cent and up to 30 per cent at one point.
Tax rates aside, Barbados has also suffered from being placed on several of the European Union’s (EU’s) blacklists, the latest being in March this year.
However, after a review, the country was removed from the EU blacklist last month.
Haynes told Barbados TODAY that the removal of the island from the EU’s blacklist should result in more confidence in the sector, pointing out that “decisions such as blacklisting tend to undermine confidence and also impact on firms being able to carry out transactions”.
“We have always tried to convey that Barbados is a jurisdiction of substance and therefore there are transactions which businesses are doing in various markets including within the European Union, and therefore when you get a blacklisting it does impact the viability of the sector,” he explained.
“So, with the removal of the blacklisting we believe that the sector will be able to function in the way we anticipate and over time will be able to grow again and come back up because Barbados is a good jurisdiction in which to invest,” said Haynes.