New tax model could attract fresh investment

An Opposition senator is proposing the island pivot to a national Environmental, Social and Governance (ESG) score as an alternative taxation model for businesses.

Senator Crystal Drakes firmly put forward this view during Wednesday’s sitting of the Upper Chamber, insisting that such a framework would not only incentivise firms to move towards sustainable practices, but it could also attract responsible investment into Barbados.

In her contribution to debate on the Corporate (Miscellaneous Provisions) Bill 2021, Drakes contended that if Barbados can move away from giving exemptions primarily on income, the country would then move the goal post for companies doing business on island to become more environmentally sustainable, socially responsible and have good governance practices.

In her breakdown of the proposed ESG score, the Opposition senator explained that persons would get exemptions at a lower tax score based on the principles in which they engaged.

Giving an example, she said if energy or water efficiency was a priority these would be the types of environmental metrics used. The social indicator would be whether the business was up-to-date with its NIS payments for its workers or if there was the availability of day care services for employees.

In terms of governance, she said the tax would be based on the diversity of the board of directors, if it was a gender-balanced board, if it was an international company, and how many of its senior managers were Barbadian.

“These ESG scores would then be tied  to the level of taxation that the companies pay rather than primarily be driven by only profits. . . . What that would do is place Barbados in a position to then dictate what is important to us, how many taxes we believe we can get from that type of policy mandate and we would be leading the pack.

“As it stands right now, I do not believe that ESG principles are adopted to a national level that is tied to corporation tax. We could be the vanguards in this type of approach. Based on the changing environment, I think that these are the types of creative policies that we have to now start to think about because the old game is being won by the old players. It was never our game to play and never our game to win,” Senator Drakes said.

“I think that that type of policy would shift the entire purpose of the economic system in Barbados. Far too many times we see businesses in Barbados where workers’ rights are being trampled and as far as the environmental sustainability is concerned, it is non-existent. We have to make sure that new policies that we create include people and include nature,” Drakes added.

Senator Drakes also warned the Government against an international shifting of the tax base which she believed would limit the country’s policy space, particularly as a sovereign jurisdiction.

Drakes argued that the Mia Mottley administration has to ensure that Barbados’ tax regime is appropriate for its socio-economic needs in the country and it cannot be that decisions like this are made in small groupings and then dictated to the rest of the world.

According to her, there is nothing that is fair or just about that.

“If we then have to abide by the rules and be compliant as a jurisdiction, what are we offering to these corporations as an advantage to moving their business to Barbados and domiciling here in our country?”

“The question then has to be, how do SIDS [Small Island Developing States] compete and be competitive in this kind of environment? And how do we then negotiate these kinds of international arrangements to ensure that there is fairness for the Barbadian middle-class and working people? “Because it cannot be that countries have to capitulate their own tax policy that is catered to the unique circumstances of their social fabric and their socio-economic needs just because people have decided elsewhere that this is the standard to abide by,” Drakes maintained. (KC)