The government’s recent announcement of changes to the corporate tax rate is being welcomed by the Barbados Private Sector Association (BPSA) which described it as timely and palatable.
However, it suggested that while the adjustments helped to end current uncertainties regarding the implementation of a 15 per cent global minimum tax rate, there could be future uncertainties.
Last week, Prime Minister Mia Mottley delivered a ministerial statement in the House of Assembly which outlined a new corporate tax rate of 9 per cent, a “top-up tax” for some multinational enterprises, and a tax rate of 5.5 per cent for small businesses that earn less than $2 million in annual income. The changes take effect on January 1, 2024 to comply with the new international tax rules to take effect next year, and will be payable on the portion of profits earned from January 1, 2024.
“The ministerial statement is timely in order to advise the Barbados position and to bring the period of uncertainty to an end. The private sector notes that the rate, as announced, whilst a significant increase from the current rate, is yet moderate when compared to what pertained in 2018 and prior.
“Within this context, the increase represents a palatable position given the requirement to comply with the Organisation for Economic Cooperation and Development (OECD) guidelines,” the BPSA said in a statement on Monday.
The BPSA said it understood the context of the reform, saying the Prime Minister was addressing “yet another crisis” for Barbados – “existential risk to our jurisdictional reputation and the real threat to our country’s economic and social development presented by both the compliance and non-compliance with the Organisation for Economic Cooperation and Development”.
“We are hopeful that the position taken by the Barbados government would bring a measure of confidence in the nation’s capacity and willingness to deal with external and internal shocks head-on,” it said.
The BSPA lauded the government for the corporation tax rate afforded to the small business sector with income of less than $2 million, as well as the provisions for the rate to remain unchanged for the insurance sector, noting that Barbados is one of the top ten captive insurance domiciles in the world.
It also said it was looking forward to hearing further directions from the Barbados Revenue Authority, “given the change to a monthly pre-payment of corporation tax and also for operational systems adjustments to facilitate a smooth transition and compliance within the private sector”.
The BPSA, in its statement, called for an improved consultative process, noting that while there was some input from “select private sector entities”, including many representatives from the global business sector, there was a lack of engagement with the wider private sector constituents.
“This is unfortunate given the broad-based impact of the domestic measures. Nevertheless, we wish to express our appreciation to the stakeholders who have diligently worked over the past two years in this regard and are heartened by the prime minister’s stated intent in the ministerial statement to engage with the wider private sector in the upcoming weeks,” it said.
The private sector organisation urged members to take advantage of the tax credits that were also announced by Prime Minister Mottley.
However, it also called for “consistency and transparency in determining eligibility for the employment and research and development credits”.
“We urge that the usual courtesy of information sharing and responses to queries from the private sector be observed, as we collectively seek to navigate any changes and new mandates arising from this corporate taxation reform.
“We also anticipate further changes to other interlocking pieces of legislation that work harmoniously with corporation tax and would anticipate further transformative measures and revisions to the broader tax code of Barbados,” the BPSA said. (MM)