Barbados paying close attention to Biden’s proposal

Local officials are hoping that Barbados’ global business sector would benefit from new tax measures being proposed in the United States. However, that hope is tempered by the call for a global minimum tax rate.

As the Joe Biden administration announced last week that it was exploring the possibility of increasing taxes on businesses, rich Americans and investors in an order to fund a multi-million-dollar infrastructure and job package, officials in Barbados said they were hoping some good could come out of it for the island.

“One possible potential positive impact is that many Caribbean countries including Barbados and the Eastern Caribbean, we have an international business sector that provides high net worth individuals with means of managing their tax liability,” said economist Professor Justin Robinson.

Robinson, the Executive Director of the Sagicor Cave Hill School of Business and Management said he was hopeful of an increase in the demand for global tax management services in the face of the proposed tax increases.

“It would be positive for our economies as persons try to minimise their own tax liability,” he said, as he responded to questions following a virtual presentation of the first quarterly CARICOM Investments Report.

“On the other hand, I don’t expect much of an impact outside that. Persons being targeted here are quite wealthy and I don’t think these increase taxes are going to push them into [a situation] that they are likely to be spending less,” he added.

Among the key measures being discussed are a higher corporate tax rate on US companies from 21 per cent to 28 per cent, increasing the global minimum tax paid from about 13 per cent to 21 per cent, limiting the ability of American multinational firms to avoid taxes by shifting profits to lower or no tax jurisdictions, and significantly increasing taxes on wealthy investors.

At the same time, US Treasury Secretary Janet Yellen has called for a global minimum corporate tax rate, saying this was something the US was working with the G20 nations to agree on.

“Together, we can use global minimum tax to make sure that the global economy thrives, based on a more level playing field in the taxation of multinational corporations and spurs innovation, growth and prosperity,” said Yellen in a speech last week to the Chicago Council on Global Affairs.

Today’s BUSINESS was unable to ascertain the exact number of US corporations with operations in Barbados.

Executive Director of the Barbados International Business Association Carmel Haynes said in theory, the Biden administration’s plan to increase the US corporate tax rate “should offer some opportunities for international financial centres outside of the US”.

However, pointing out that Barbados had moved away from selling tax efficiency, “as it must”, Haynes said “what we offer is an alternative jurisdiction that works from every perspective, while offering an opportunity to enjoy our lifestyle. A fair and responsible tax regime is then a bonus”.

Stopping short of saying whether she would expect US businesses to move operations to Barbados to enjoy the current low corporate tax rate, Haynes told Today’s BUSINESS: “Barbados is certainly open and welcoming to businesses of various sectors migrating to our shores”.

“As we have in recent years, we continue to work hard to ensure our platform is open and adaptable in this time of great and rapid innovation in business,” she added.

In an unprecedented move in November 2018, Prime Minister Mia Mottley announced the convergence of domestic and international corporate tax rates between 1 and 5.5 per cent, based on a sliding scale of taxable income.

In relation to the call for a global corporate tax rate, Haynes said this was not the first time such a call has been echoed, but quickly added that should the US push for this to become a reality this time around “it will certainly add substantial energy in that direction”.

“Such a development would be an ultimate assault on the sovereignty of many small international financial centres, and must be resisted with full force,” she added. (MM)