Controversial global tax move could be blessing in disguise

The recent agreement by G7 countries on a global minimum corporate tax rate of 15 per cent could serve as an impetus for Barbados to deepen its ties with larger countries faced with similar challenges.

That is the view of Opposition Senator Crystal Drakes, who told Barbados TODAY that while Barbados’ ability to attract international corporations would be severely hampered by the agreement, it presented the perfect opportunity to strengthen South-South cooperation.

Barbados has one of the lowest corporate income tax rates in the world at 5.5 per cent and would be at risk of losing much needed business if the rate was to move to 15 per cent.

“What we have done since this administration has come in, is that we have tried to strengthen a lot of our diplomatic ties to African nations and to facilitate more South-South cooperation.

“The proposal on the table has to be how do we leverage this scenario to even further deepen those South-South cooperation ties because what is clear, even in the vaccine rollout, is lesser developed countries are being marginalized in terms of vaccine distribution.

“So, if we have a scenario where the global minimum tax rate is also affecting not just Caribbean nations, it is a case where we can also mount a platform where there is a call for greater equity across the board on a number of issues, whether it be on the vaccine distribution, whether it be the global minimum tax rate, whether it be reparations. There are a number of issues that we have in common with a number of our southern countries or African nations,” Drakes, an economist and sustainability strategist contended.

She contended that forging new diplomatic relationships and strengthening old ones with friends in the same boat may be Barbados’ “best bet and strategy for what is to be a decade of great uncertainty and complexity”.

“This development is also a lesson for us in where we stand in the fight against the climate crisis. Countries privileged with time, resources and relatively little effects are the ones needed to make the radical transformations necessary to bring CO2 levels down. The G7 proposal for a minimum global corporate tax may be the impetus we need to launch a new platform of global cooperation built on equity and justice,” she added.

During their meeting last month, the finance ministers of the G7 nations – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States – agreed on the principle of a global minimum tax rate of at least 15 per cent on multinational companies’ overseas earnings, on a country-by-country basis.

Some Caribbean countries have already signed on to the change, and Drakes said while she was not sure what Barbados’ formal response would be, it appeared as though we “were not jumping into the arrangement without thinking it through”.

“If we have to sign on to something that is going to raise our tax bracket by 10 per cent, we then have to figure out what are the implications of that, in terms of our fiscal revenue, in terms of our tax revenues and the implications that that then has on our ability to provide social services for our people,” the Senator said.
(randybennett@barbadostoday.bb)