Concerns over global tax rate persist

There is a concern that Barbados could lose a chunk of its international business should the planned global corporate tax rate of at least 15 per cent is implemented by 2023.

However, with just over 14 months to go before the possible execution of that measure, Governor of the Central Bank of Barbados Cleviston Haynes said it was still early days to say exactly what the impact could be like on Barbados’ international business sector.

“We believe that we still have value to offer within the international business sphere,” said Haynes as he responded to a question on Tuesday during his economic review for the January to September period.

“Clearly, based on what it has contributed to our economy, particularly in terms of corporate revenues and foreign exchange earnings, it would be a blow if we were to lose a substantial portion of the sector.

But it is too early to tell what the outcome will be because it is still being negotiated and the time of implementation is still not clear for all the countries involved,” said Haynes.

“There are still a lot of uncertainties as to what this will actually mean. One of the things about it is that it is hoped to be implemented by 2023. The experts tell me that is a very ambitious target and therefore it is unclear as to whether or not it will come into place as soon as possible,” he added.

The proposed 15 per cent minimum corporate tax rate is being touted by some of the world’s largest and most powerful nations as a way to ensure that big companies pay a fairer share of tax no matter where they operate, due to concern that multinational companies were re-routing their profits through low tax jurisdictions.

The new minimum tax rate would apply to companies with annual revenue of around US$860 million, and is hoped to generate some US$150 billion in global tax revenue per year.

With the highest level of corporate tax rate in Barbados set at 5.5 per cent, local officials are very wary of the new rule and have since engaged officials of the Organisation for Economic Corporation and Development (OECD) and other stakeholders to see what options were possible.

Haynes said: “There are still negotiations going on and those negotiations that are going on are intended to see if there can be some carve-outs to minimise the impact of the implementation of this tax on our economy.

Until we know what decisions are taken there it will be very difficult to say what the impact will be [on the international business sector].” In August, Barbados became the 133rd country to sign on to the two-pillar plan, that would likely result in an increased in taxes for companies registered here.

Earlier this month Ireland, Hungary and Estonia agreed to the plan, bringing it closer to the 140 signatures required. Kenya, Nigeria, Pakistan and Sri Lanka have not yet signed the agreement. (MM)