On Monday November 7, 2023, the Hon Mia Amor Mottley, Prime Minister and Minister of Finance, Economic Affairs and Investment, rose in Parliament to inform and announce reforms to Barbados’ corporate tax rates by way of a Ministerial Statement.
The prime minister provided the contextual background of why the statement had to be made as well as the recommendations and position taken by the government of Barbados to reform the corporate tax rate.
The context for the statement is well understood by the Barbados Private Sector Association (BPSA). The BPSA opines that the Prime Minister once again brought to the public’s attention and addressed yet another “crisis” for Barbados; that is, the existential risk to our jurisdictional reputation and the real threat to our country’s economic and social development presented by both compliance and non-compliance with the Organisation for Economic Cooperation and Development (OECD).
So why could this be regarded as yet another crisis for Barbados? The impact of the uncertainty since the announcement of the intent of a global minimum corporate tax rate of 15 per cent and what could portend for domestic and international companies operating in Barbados, given our present corporate tax structure, is of significant relevance. This uncertainty had the potential to negatively impact our global business sector and, by extension, the nation’s revenue collection capacity as multinational businesses contemplated the jurisdictional risk of domiciling in Barbados and forecasted the impact of any changes on the sustainability and viability of enterprises beyond 2024.
Our response therefore is firstly that 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 OECD guidelines. Each of the productive sectors will now be required to assimilate and assess the impact of the measures and determine how business will truly be impacted while acknowledging that the role of the private sector in the modern economy is to drive economic growth through the creation of value-added goods and services. The value chain sectors such as the manufacturing sector for instance, have already signalled that the impact on their members’ value add in the productive cycle is to be determined.
The BPSA lauds the fact that consideration was given for a lower corporation tax rate of 5.5 per cent for small businesses whose gross income is less than BD$2 million. In addition, the provision made for Class 1, Class 2 and Class 3 insurance businesses to remain unaffected is well acknowledged. This is positive as Barbados is one of the top 10 Captive insurance Domiciles in the world, noting the vast majority of companies fall into the category of Class I insurance business.
However, there are a mere eight weeks between the time of the announcement of the intended changes and the date of effective implementation. The private sector is therefore cognizant of the need for 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 urges the private sector of Barbados to maximise the opportunities presented within the context of the new tax credits. Nevertheless, the BPSA cautions of the need for consistency and transparency in determining eligibility for the employment and research and development credits.
We urge that the usual courtesies 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.
Has Barbados averted yet another crisis? The answer may not be forthcoming with a degree of certainty but 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.
The BPSA is cognisant that the international response to the Barbados announcements and the cascading positions in the 130 countries potentially impacted by the global minimum tax imperative, presents a very fluid situation which may necessitate further changes over the ensuing two years. What is not well assimilated, however, is the consultative process leading to the measures, as announced. The private sector notes that while there was input from select private sector entities, inclusive of 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.
The BPSA commits to working with all stakeholders to ensure that Barbados continues to be an attractive place for doing business and so attract a high level of investment by both local and foreign investors. In so doing the BPSA maintains a policy of consultation, engagement and collaboration on any issues arising from these measures.
The Barbados Private Sector Association (BPSA) is the umbrella agency of private sector organisations in Barbados. The role of the association is to promote and defend the interests of the private sector at the national level.
Read our ePaper. Fast. Factual. Free.
Sign up and stay up to date with Barbados' FREE latest news.
Barbados Today firmly discourages any commentary or statements that are libelous, disruptive in nature or incites others to violate our Terms of Use. Any submissions made on our comment section, are solely the views of the individual and not Barbados Today.