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Treaty network an advantage in securities trading

7/28/2009

BARBADOS’ relatively extensive tax treaty network gives it an advantage in the development of an international securities market (ISM).

This was the argument made by Chairman of the Barbados Stock Exchange (BSE), Dr. Grenville Phillips, who was speaking last week at a breakfast meeting held by the BSE at the Hilton Hotel, to present a business plan for the development of an ISM to members of the International Business Community.

An ISM is a market for the listing and trading of the securities of issuers incorporated in one country that would otherwise be listed and traded on other exchanges around the world.

The example given by Andy Wilson, CEO of the International Securities Consultancy Ltd., one of the firms contracted to develop the plan, would be that of a mining company that is incorporated here in Barbados, but goes to other capital markets around the world to list on these exchanges and raise capital.

According to Phillips, “such a market will avoid the need for those companies that are established in Barbados to comply with a further set of requirements for issuance and listing of their securities in different jurisdictions”, and he argued that “by utilising our taxation agreements the BSE will assist in providing a one stop shop for international companies to domicile in Barbados, to raise capital in Barbados, and list on the BSE’s International Securities Market”.

The Chairman stated that the BSE is actively pursuing a number of strategic initiatives aimed at achieving its vision of transforming the organisation into a modern, efficient, cost effective, client service driven exchange that promotes trading of financial securities, encourages investment by the public in business enterprises, and attracts international investment.

One of the key advantages that he argued Barbados possesses, as it relates to the achievement of this goal, is the number of Double-Taxation Agreements (DTAs) and bilateral agreements that have been negotiated over the years.

He pointed to agreements with CARICOM countries, the United States, the United Kingdom, Canada, Austria, Finland, The Netherlands, Norway, Malta, Sweden, Switzerland, Cuba, Venezuela, China, Mauritius, Botswana, and made the point that discussions are being held with Japan and India.

These agreements make Barbados a conduit for investment into these countries, thereby, making the island attractive to investors from countries that do not possess such agreements, given that the latter would be desirous of having access to the markets that Barbados has agreements with.

Phillips stated that the US and Canadian treaties in particular are considered very favourable for certain types of investors.

The Chairman also spoke to the strength of the local regulatory system, making the point that this has been acknowledged globally.

“We are a small, but well regulated jurisdiction, and this was recognised by the Organisation for Economic Cooperation and Development (OECD) when we were placed on their top tier list of countries that have substantially implemented international agreed upon tax standards. Essentially, Barbados made the colour-coded ‘white list’”.
He made mention of the fact that one of Barbados’ main competitors in the region, Bermuda, was not on this list when it was first released, but has since appeared there, and that the other major competitor, The Cayman Islands, has not made it to the top tier.

“The Barbados Government continues to seek out new opportunities in the development of our International Business Sector, and we at the Barbados Stock Exchange intend to play our part”.

“We view the creation of the ISM as the last pillar in the establishment of a true international financial centre here in Barbados. Solutions must be found, and we are embarking on a series of new initiatives, which will foster growth and development of our market. We recognise and realise that market development may be achieved through either mobilising domestic financial resources, or mobilising international resources, in the form of foreign direct investment”. (RH)

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