Although rejoicing that Barbados has been removed from the European Union’s (EU) so-called blacklist, Minister of International Business and Industry Ronald Toppin remains sceptical of the political and economic bloc, saying he sees a rough road ahead due to expected continued shifts in goal posts.
At the same time, one of Barbados’ lead tax negotiators is predicting that the island could come up against taxation and sanctions on the quickly growing digital economy.
Speaking on Thursday at the annual tax update seminar hosted by the Institute of Chartered Accountants of Barbados (ICAB), Toppin said he remained optimistic the country would be able to overcome future obstacles relating to tax compliance.
Lauding the Barbados Revenue Authority (BRA) and the International Business Unit for their hard work over the past several months, Toppin said it was a challenge.
“Being in this position was extremely annoying since we were being forced to discharge a responsibility that should have been discharged over the period July 2015 to June 2018,” Toppin told the online forum.
“Let me state, however, and strongly so, that the road ahead is still uphill, with goal posts changing ever so often and that, despite this early success, there is still work to be done as we aim as a government to position ourselves that the probability of EU countries taking defensive measures against Barbadian entities is greatly minimized,” he said.
Toppin explained that in addition to reputational harm to countries that end up on the blacklist, the EU member states committed from January this year, to use the EU blacklist to apply one of four specific legislative measures.
“First, non-deductibility of costs incurred in a listed jurisdiction. This basically means that certain payments to a company in a listed jurisdiction which would normally be tax deductable by that company in their jurisdiction of origin, would no longer be deductable,” he said.
“Secondly, controlled foreign company rules to limit artificial deferral of tax to offshore, low-taxed entities. This would affect a parent company in a European jurisdiction which has a subsidiary in Barbados. The parent company would be taxed on both incomes,” he explained.
The other legislative measures, he said, would include the imposition of a withholding tax at the rate of the EU jurisdiction because Barbados is deemed to be below their tax threshold, or the limitation or abolishment of the participating exemption on shareholder dividends.
The EU Council had placed Barbados on its blacklist last year, following a peer review by the Organisation for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes, which rated Barbados as “partially compliant”.
Barbados is due a supplementary review by the OECD’s Global Forum sometime this year.
Toppin said in order to deal with existing concerns and take proactive steps a committee had been established, consisting of representatives from the BRA, the Corporate Affairs and Intellectual Property Office, the International Business Unit, and the Anti-money Laundering Authority, with him as Chairman.
“This is to ensure that we stay focused and keep the momentum in addressing the outstanding issues in preparation for the upcoming onsite inspection by the OECD,” said Toppin.
“In addition, we have taken the initiative to submit periodic updates to officials of the Global Forum’s Secretariat on our progress in addressing areas of concern,” he said, adding that he remained confident that Barbados will overcome all the challenges.
Meanwhile, Kevin Hunte, Director of International Business in the International Business Division, predicted that Barbados could come up against further sanctions.
“I don’t we can think final goal post and EU in the same sentence unless there is a negative before it. So there will never be a final goal post. That is my humble estimation. There will always be something coming down the pipe. We know that right now what is coming down and is around the corner is taxation in the digital economy,” said Hunte.
Pointing out that the EU was “sitting back” and watching how things would first develop at the level of the OECD, Hunte said “I can almost promise you that once it is concluded at the OECD level, we will see the EU will come out and do one of two things – fully embrace it or they will fully embrace it and add on – and I am tempted to believe it will be the latter. What the add-on is unfortunately, we generally don’t know.” (MM)