Barbados will not be rushing to implement the proposed 15 per cent minimum global tax rate, Director of the International Business Unit (IBU) in the Ministry of Energy and Business Development Kevin Hunte has assured.
At the same time, advisor to the Government on tax investment matters, Ben Arrindell, has indicated several options were being considered to ensure the country remains competitive while compliant, including a review of the country’s current one to 5.5 per cent corporate tax rate.
The issue came up for discussion on Thursday morning during a global business industry update which was hosted by the Barbados International Business Association (BIBA) and forms part of its 25th-anniversary celebrations this year.
Speaking specifically about pillar two of the Organisation for Economic Cooperation and Development’s (OECD) two-pillar tax rule, which is being touted as a solution to address tax challenges arising from digitalisation of economies, Hunte said that “the devil is in the details”.
According to the OECD, its minimum global tax plan is designed to “reform the international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate”.
In pillar one, it is aiming to achieve a “fairer distribution of profits and taxing rights among countries with respect to the largest multinational enterprises, including digital companies”.
Pillar two seeks to establish a floor, or a rate below which countries will not set their corporate income tax rates. This will be executed through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.
Over 140 jurisdictions, including Barbados, have agreed in principle to the implementation of this initiative.
However, Hunte said that a tremendous amount of work was still to be done at the technical level, and, equally, “a lot of uncertainty exists from a political perspective globally”.
“Notwithstanding these factors, the Government has not rested on its laurels, but together with professional private sector inputs . . . has designed a plan on how the principle of a global minimum tax rate will be applied in practice in Barbados. This plan comprises a few options and is currently being discussed at the highest level,” he said.
“Thereafter, we will enter into meaningful dialogue with those entities which will be impacted to ensure that what is proposed, multinational enterprises are in agreement with.
“I must stress the point here, though, that we will not be quick as a government out of the blocks with this one, but that we will monitor and assess developments globally while working on our plan that is being prepared, and when the time is right, the plan would be implemented, ensuring that we have as wide a cross-section of buying into that plan as possible,” explained Hunte.
Arrindell, who is a director of the wealth management firm Cidel Financial Group, told the BIBA seminar that in light of the proposed minimum global tax rate, a review of the island’s current corporate tax rate that is based on taxable income on a sliding scale was one of the possible options open to the Government.
“I would say that is one of the options that’s being considered, but we really have not ruled out any options at this point in time. We are doing the assessment and at the end of the day what we would like to achieve is a situation where Barbados is compliant, but at the same time remains competitive and we retain as many of the multinationals that currently operate in the jurisdiction,” he said.
Barbados, like other jurisdictions, is concerned about losing multinational firms as a result of the global tax rate that is higher than the local corporation tax.
As such, another option being considered, which was touted by economist Professor Avinash Persaud last year, was offering grants to companies that spend on research and development in Barbados, to encourage them to stay.
Arrindell said this option was still on the table and would be used “if it is that we increase the rates at all”.
Meantime, noting that Barbados intended to “continue … being a friend to all and a satellite of none”, Hunte reported that authorities were focusing on finalising a bilateral investment treaty with Kenya this year, and have already paved the way for entering a bilateral investment treaty with Qatar and the United Arab Emirates.
“These new relationships are of significant importance as we seek to expand our footprint globally. I take this opportunity to let you know that Barbados has revised its model of bilateral investment treaty . . . This new model is significantly more in line with current international practices in several areas,” he said.
During the BIBA event when he provided an overview of some of the measures being taken to bring greater efficiency to the doing business climate in Barbados, Hunte reiterated that the country was not a tax haven.
“We are a legislatively mature jurisdiction that is only interested in attracting reputable businesses of substance so as to boost and bolster our economy and enhance our way of life,” he said. marlonmadden@barbadostoday.bb
