Barbados remains an attractive and mature centre for global business and, after more than a half century of providing financial services, is a high-quality jurisdiction for international business and investment. With a well-educated population and extensive infrastructure, the country remains attractive to several categories of investors. This is enhanced by a significant and ever-expanding tax treaty network and by professional regulators across the industry. Barbados continues to meet its international obligations to the Organisation for Economic Development and Cooperation (OECD), recently restructuring the country’s tax system and retooling the international business sector to comply with new international tax standards and avoid being deemed “a harmful tax jurisdiction” by the OECD.
Barbados is well advanced in implementing minimum standards to combat Base Erosion and Profit Shifting (BEPS), as mandated by the OECD and agreed to by over 125 countries. This is to minimise the chance for tax payers to shift their profits from higher tax countries to low or no tax countries, where they have little to no economic activity. This endeavour should result in increased tax revenue and technical knowledge for all countries involved, but the one-size fits all solution may not always be the right answer. Whether about tax compliance or anti-money laundering, the international rules are continually set and changed by developed countries sometimes without careful consideration for smaller developing countries.
Like so many other international compliance initiatives, the BEPS initiative is a creature of the G20, who mandated it and tasked 44 developed countries with creating and implementing the policies and rules that are now being implemented globally. It was only as implementation loomed that formerly excluded countries were invited to join an “Inclusive Framework” to have input into the implementation of the BEPS minimum standards. This was after the rules and policies were already set by the BEPS 44 Group, without significant regard to the different needs and priorities of developing countries.
Many developing countries already had existing deficiencies in their domestic tax systems, lack of capacity building and training and, more importantly, considerably less resources than developed countries, to dedicate to complying with the new global standards. It should be noted that while the OECD pledged technical support with BEPS implementation, there would be no financial assistance offered to further the effort for developing countries now caught up in global implementation.
The OECD, World Bank and International Monetary Fund have all recognised that developing countries rely more heavily on corporate income tax and the use of tax incentives to attract foreign investment. They also concede that more study is needed on the possible negative effect of BEPS implementation in these areas. Ironically this is as countries are already in the implementation phase.
The USA, UK and Australia have all taken the unilateral decision to address profit shifting issues through passage of their own domestic laws, much to the chagrin of the OECD. This lends even more credence to the idea that a universal approach may not be the best solution and shows a differing of ideas among developed OECD countries.
So here we are in 2019, having enacted legislation to amend or abolish some of our financial laws, while creating new ones, including the Business Companies (Economic Substance) Act, to enforce substance rules. Barbados continues to move forward in enhancing its regulatory regime and providing a stable and efficient environment for businesses of substance, while striving to become a premier hub for global business.
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