On 5 December 2017 yesterday, the Council of the European Union through its Code of Conduct Group approved and published conclusions containing an EU list of non-cooperative jurisdictions in taxation.

It  also  agreed  on  the  further  process,  including  the  application  of 'defensive' measures with regard to the listed jurisdictions.

The aim of this from their perspective is to promote good governance worldwide, in order to maximise efforts to prevent tax fraud and tax evasion. The initiative is part of the Council's external strategy for taxation, delivering on its November 2016 conclusions that called for a list to be established by the end of 2017.

It is important to note that The Council's work on the list has been conducted in parallel with the OECD and in the context of the G20. With respect to the OECD, the EU works in parallel with the OECD on account of the anti-BEPS (Base Erosion and Profit Shifting) measures as is monitored by the Forum on Harmful Tax Practices (FHTP) but more on this a little later.

In the report of the General Secretariat of the Council "The EU List of Non-cooperative jurisdictions for tax purposes", Annex 1 page states that "Barbados has a harmful preferential tax regime and did not clearly commit to amending or abolishing it as requested by 31 December 2018. Barbados' commitment to amend or abolish other harmful tax regimes in line with criterion 2.1 will be monitored." The foot note states that the report is "on the basis of the responses received by 4 December 2017; 17:00 (UTC +01:00)."

It is important therefore to set the context so that Barbados' position on this  issue  is  clear.    The  Organization  for  Economic  Cooperation  and Development and more specifically the FHTP developed an engagement strategy  for  OECD  Members  and  BEPS  Associates  to  work  on  regimes that  met  the  criteria  for  classification  as  harmful  tax  practices.  What does  this  mean?  It  means  that  the  Action  Plan  on  Base  Erosion  and Profit  Shifting  (BEPS  Action  Plan)  identified  15  actions  (four  of  which are  minimum  requirements)  to  address  the  BEPS  issue.  In  October 2015  the  G20  Finance  Ministers  endorsed  this  Action  Plan  which includes Action 5. Action  5 is the Countering of Harmful  Tax Practices More  Effectively,  Taking  into  Account  Transparency  and  Substance. This and the other  three minimum standard Actions are conducted  by a  peer  review  system  which  involves  self-review  questionnaires  on  the regimes by the Countries in question.

There was established an Inclusive Framework relative to the BEPS Action plan and all members of the Inclusive Framework have committed to the implementation of the Action 5 minimum standard. Let me state clearly for the Barbadian public and our International Business and Financial Services Sector that Barbados is a member of the Inclusive Framework and has committed to the Action 5 implementation.

To this end, a committee was established to ensure the accuracy of the information provided to inform FHTP discussions and to examine what if  any  amendments  could  be  made  to  the  various  regimes  to  ensure compliance with agreed standards while protecting Barbados' interests. This  committee  comprised  representatives  from  the  International Business  Division,  Central  Bank  of  Barbados,  Financial  Services Commission,  Barbados  International  Business  Association,  Invest Barbados,   Institute   of   Chartered   Accountants   of   Barbados,   the Barbados  Revenue  Authority  and  one  private  taxation  expert.  The International Business Division (IBD) engaged the FHTP Secretariat on a  weekly  basis  from  around  the  Month  of  March  of  this  year,  working diligently  to  ensure  the  comprehensive  examination  of  our  regimes which   were deemed in scope according to the criteria set out by                                                                                 the FHTP.

The regimes in question are: International Business Companies, International Societies with Restricted Liability, International Trusts, Qualifying Insurance companies, Exempt Insurance Companies, International Financial Services Act and the Foreign Credit for Qualifying Overseas Projects. There is one other regime which the FHTP deemed as not in scope but the EU Code of Conduct Group deemed as in scope to which I will address shortly, this regime being the Fiscal Incentives Act.

Barbados by way of letter dated September 12th  2017, emanating from FHTP meetings held in March, May, July and September of this year in which  Barbados'  regimes  were  discussed  and  concerns  expressed, committed to amending the following regimes by December 31st  2018 –

  • International Business Companies
  • International Societies with Restricted Liability
  • Exempt Insurance
  • Qualifying Insurance Companies Act
  • International Trusts

On November 16th 2017, Barbados sent a letter to the Chair of the Inclusive Framework on Base Erosion and Profit Shifting of the OECD stating categorically that the International Financial Services Act and the Foreign Credit for Qualifying Overseas Projects regimes would be amended by the stipulated deadline and that on-going work and progress would be reported to the FHTP as Barbados continues its work with the Secretariat.

Barbados thereafter received an email from the EU, after the publication of   the   FHTP's   findings,   stating   that   among   other   things:   1) notwithstanding  that  the  FHTP  had  deemed  the  Fiscal  Incentives  Act Regime as out of scope, the EU had slightly different assessment criteria and that their experts had deemed it as in scope and 2) that a reiterated commitment to the EU this time of what had previously been committed to the FHTP was necessary.

Barbados  responded  and  inquired  as  to  the  EU's  conclusion  that  the Fiscal  Incentives  Act  Regime  was  in  scope  and  there  began  a  series  of email   dialogues   between   the   EU   and   Barbados   through   the International Business Division. Subsequently Barbados by letter dated November  27,  2017  communicated  with  the General  Secretariat  of  the Council  of the  European Union and the Code of Conduct  Group of  the EU that Barbados reiterated its commitment made to the FHTP to amend the regimes of:

  • International Business Companies,
  • International Societies with Restricted Liability,
  • International Trusts,
  • Qualifying Insurance Companies,
  • Exempt Insurance Companies,
  • International Financial Services Act and
  • The Foreign Credit for Qualifying Overseas Projects

Barbados also, in that same letter, outlined that it is a member of the Inclusive Framework and is thereby committed to the implementation of Action 5 of the BEPS standards. Barbados also stated that notwithstanding the Fiscal Incentives Act, as a member of the World Trade Organization, Barbados is committed to reviewing this regime. The EU then responded and queried certain aspects of the Fiscal Incentives Regime to which Barbados replied outlining how it operated and re-enforced commitment to addressing that regime. That Letter was sent November 28, 2017. Finally, by way of correspondence dated December 1st, 2017 Barbados indicated to the EU that the Cabinet of Barbados had taken a policy decision to abolish this regime by September 2018.

So to refresh our memories as to the statement in "The EU List of Non- cooperative jurisdictions for tax purposes", Annex 1 page 8 states that "Barbados has a harmful preferential tax regime and did not clearly commit to amending or abolishing it as requested by 31 December 2018. Barbados' commitment to amend or abolish other harmful tax regimes in line with criterion 2.1 will be monitored."

Barbados has therefore enquired of the EU yesterday morning by way of email as to which regime Barbados has not clearly committed to amending. The IBD has telephoned the EU this morning seeking clarification but to date no response has been forthcoming.

It  is  the  view  of  the  Barbados  Government  therefore  that  to  include Barbados  in  Annex  1  listed  as  a  non-cooperative  tax  jurisdiction  is extremely  unfortunate  and  unfair  in  light  of  and  despite  Barbados' recent  direct engagement with the EU  Code of Conduct  Group (COCG) over the past  months.  Barbados'  work  with  the  FHTP  is  also  well documented.

Barbados is a jurisdiction that has always valued good international

relations from Latin America to Europe to the African continent. It is important to note that Barbados has tax treaties in force with ten (10) of the twenty-eight (28) EU member countries (inclusive of the UK). They are with

  • Austria
  • Czech Republic
  • Finland
  • Italy
  • Luxembourg
  • Malta
  • Netherlands
  • Spain
  • Sweden
  • United Kingdom

Barbados has completed its ratification of the DTAs with Portugal, Slovak Republic, and Cyprus, respectively and is awaiting official notification from them on the status of their ratification of the DTAs as required in order for the DTAs to enter into force. We are also awaiting signature of a DTA initialled with Belgium.

It should also be noted that Barbados has a Tax Information Exchange Agreement (TIEA) in force with Denmark and is also awaiting signature of similarly initialled Agreements with France and Germany, respectively.

Consequently Barbados has committed to signing the Multi-lateral Instrument in a signing ceremony in Paris on January 24th 2018. Through the IBD, there has been a concerted effort to ensure that Barbados is a well-regulated, transparent jurisdiction of substance.

This is precipitated by a harmonious relationship with the Service  Providers which has resulted in the cancellation on November 27th,

2017 of the licenses of six International Business Companies on grounds of public policy.

So in conclusion I wish to state forcefully that Barbados is NOT a non- cooperative jurisdiction in taxation matters or any other matter. We are and remain cooperative but true to our ideals and policies as a sovereign nation as we strive to be the International Financial jurisdiction of choice.

With respect to the way forward, Barbados will dispatch a detailed correspondence to the EU requesting an urgent review of their rather unfortunate listing. Secondly, being mindful that our Region will continue to be under scrutiny and attacks from other regional groupings and multinational organisations, Barbados will once again request a regional dialogue on the matter with the goal of establishing a high level regional team of experts to engage with external parties on behalf of the Region. We really expect that CARICOM will take the lead on this matter.

Thirdly we will engage all of our officials and private sector part to continue to educate our multinational partners on these issues.

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