Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today Inc.
by Guy Hewitt
In the past, approximately 60 per cent of corporate tax revenue earned came from the International Business and Financial Services (IBFS) sector. The tax revenues, paid in US dollars, and the employment generated for local lawyers, accountants, corporate secretaries, finance and IT professionals and the like, made the sector an important pillar of our economy. It has been one of the few bright sparks during this COVID-19 pandemic.
However, due to international changes in tax compliance, know your customer regulations, etc. small financial centres like Barbados have come under increased scrutiny. In an attempt to address this, the current administration revised the Income Tax Act to get rid of the ‘offshore’ designation of companies in November 2018.
Now all companies are locally registered ‘onshore’ companies with a tax rate of 5.5 per cent, down from 30 per cent. Special provisions remain for entities that earn 100 per cent of their income in foreign currency.
Notwithstanding, despite compelling evidence to the contrary, the Government laboured under the misconception that is has solved the problem.
Two years after the new corporate tax designation, Barbados was again ‘Blacklisted’ by the European Union (EU) i.e. added to its high risk ‘List of non-cooperative jurisdictions for tax purposes’ for non-compliance with their rules because of either inadequate Anti-Money Laundering (AML) or tax transparency practices.
Ronald Toppin, Minister of International Business & Industry, did as politicians tend to do and blamed the former administration for non-movement on the issue and stating: “It is mind-boggling that the EU would even contemplate taking such drastic action at this time. Even with the partially compliant rating Barbados has made great strides in stepping up from that rating.”
I’m not sure why he thinks Barbados should be given special favours, you are either compliant or not, I don’t think anyone ever won a test match by ‘partially’ making runs…
Barbados is, as we speak, still on the Financial Action Task Force (FATF) “Grey List” of “Jurisdictions under Increased Monitoring.” I wonder how long it takes the largest cabinet (aka wardrobe) in the history of Barbados to read all these lists. Our smaller neighbours in the Eastern Caribbean seem to be able to comply while we struggle.
One of the main requirements is the revision of the act to ensure that Corporate Affairs and Intellectual Property Office (CAIPO) has records of the names of the major beneficial owners of companies (over 25 per cent interest). For some reason this seems difficult for the Government to implement.
Now we are hearing reports of individuals and companies with Barbados residency and overseas bank accounts having to change their tax residency away from Barbados by the end of May 2021 or face possible sanctions. A further six months on from our EU blacklisting, we have been put into the designation “Cooperating with the EU in implementing its commitments” but in the meantime companies and expats who make an important contribution to the Barbados economy are being pressured to leave our jurisdiction.
This could kill the Welcome Stamp programme as banks are telling remote and gig worker clients that they’re not allowed to be resident in Barbados. It may also make the much-needed remittances from our Diaspora harder. I am receiving calls from Bajans in the UK.
The latest nail in the coffin of the IBFS sector got passed in the UK Parliament that brought into force on 26 March 2021 the amended Money Laundering, Terrorist Financing and Transfer of Funds (Information on Payer) Regulations 2017. Barbados again was blacklisted as a “High-Risk Third Country.”
All the current Attorney General could tell us is “We were given the assurance by the UK that the list would simply mirror the Financial Action Task Force’s (FATFs) list of jurisdictions with strategic deficiencies.” I’m not sure why he would want to mirror that as Barbados is grey-listed there. What a motley crew.
Our perennial blacklisting reflects the Government’s lack of appreciation of the IBFS sector and its failure to engage strategically. If we knew the UK listing was coming why didn’t we use diplomatic channels to mitigate the effects of it? I have previously stated that we do not need diplomats abroad simply to attend cocktail receptions and bring home luxury vehicles, but to engage host countries in a strategic and focused manner.
The continued absence of a high commissioner in Canada, for reasons unknown given the conflicting stories told, reflects this failing. One remembers the days when Barbados’ voice was prominent in the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. We were elected to serve as Vice Chair of its Steering Committee and even hosted their conference in 2015.
The International Business and Financial Services is a bread-and-butter industry that complements the tourism sector. Almost three years to the day that this new administration won its landslide victory, it’s mind-boggling at how little priority is being given to such an important sector of our economy.
The IBFS sector is crying out for leadership from the Government that is as dynamic and as nimble as the sector itself. It’s mind-boggling that we seem to be moving in reverse. May the Lord continue to be the people’s guide.
Guy Hewitt is committed to Barbados. He resides in Florida.