EDITORIAL: We must find solutions
SOME weeks ago Donville Inniss, Barbados’ Minister of Industry and International Business, spoke about the lingering threats to this country’s International Business and Financial Services sector.
In an address to a function sponsored by the Institute of Chartered Accountants of Barbados (ICAB), he remarked that this country has not thrown its hands in the air and remained inactive to the latest threat to the sector from the international community. Instead, says Inniss, the country has sought to be a partner in the paradigm shift on international tax policy.
Last week, Barbados got another blow from the global community with reports that the island was placed among a list of 17 countries categorised as tax havens. The action came from the European Union (EU), which Inniss said the following day was extremely unfortunate and unfair.
He told the media that Barbados is not a non-cooperative jurisdiction when it comes to taxation matters, but rather remains co-operative but true to the country’s ideals and policies as a sovereign nation. Depicting Barbados in this light is very uneasy in that it has the potential to scare away foreign direct investment (FDI), which the island requires to keep its economy afloat.
The sector has had many setbacks since the onset of the global reaction and policymakers would want to see that it settles down while recovering from those early setbacks. That situation included changes to Canadian tax policy, the relocation of businesses from Barbados to other jurisdictions, and the consequential loss of financial inflows.
In fact, Government usually argues that one of the reasons for the increased taxes levied on Barbadians has to do with the loss of over $400 million in revenue from those firms which have exited the International Business sector.
Data published by the Central Bank of Barbados have revealed that income from the sector was just about one billion dollars at the end of last year, short of the $1.2 billion netted in 2008, the same year the global crisis came on.
After Tourism, the sector accounts for the highest amount of foreign exchange inflows into the country. The sector is being subjected to stiff competition from other players across the globe and from big countries which continue to change up their tax laws to ensure their nationals do business at home.
They prefer that their nationals who benefit from low taxes in offshore jurisdictions, invest at home and keep the resources within their borders. That is the stage global business has reached and no matter how small countries protest, they will not be given a hearing. Therefore issues like being labelled as tax haven, non-cooperative jurisdiction and the like are not good for Barbados, simply because too much is at stake.
Inniss had told the ICAB meeting that the so-called Action Point Number Five is focusing on the sector and the businesses operating locally. Each product that Barbados offers as part of the sector is being scrutinised by those who continue to push the concept of harmful taxation practices, the minister advised.
He indicated that Barbados can quarrel or even cry foul in highlighting the hypocrisy that there are member states within the OECD with regimes that are deliberately more harmful than any in this region. There has to be a way out in preventing these situations from surfacing and it is up to stakeholders to find one.