Former Prime Minister of Barbados the Rt Hon Owen Arthur (left) shared a word with Director, Graduate Studies & Research Professor Winston Moore during the lecture.
Arthur warns of IMF, OECD, EU implications
WHILE Barbados may have a seat at the table with the International Monetary Fund (IMF), there are other extra-regional entities seeking to poke their way into the affairs of the region, which could spell trouble for one of Barbados’ key sectors.
Former Prime Minister of Barbados the Rt Hon Owen Arthur warned that Barbados could be feeling the effects of the European Union (EU) and the Organisation for Economic Cooperation and Development (OECD) when they seek to impose their will on countries.
He was at the time delivering a public lecture hosted by the University of the West Indies Cave Hill Campus in the Roy Marshall Complex on Monday night, entitled: The IMF and the Caribbean: New Directions for a New Relationship.
According to the former Prime Minister, “The EU, led in large measure by the French Government is under its Base Erosion and Profit Shifting Project, [is] once again seeking to force fundamental change in the Barbados Corporate Tax Regime. It wishes the distinction between the Corporation tax rates on local companies and that on companies in the Offshore and International Business Sector to be removed.”
“One rate is 30 percent. The other is around 1 percent. To converge the two rates runs the risk of losing most of the revenue paid by local companies if the 30 percent rate is reduced to that of the international business companies. Or losing the business of the international business sector if its rate is raised too high. The two rates can be conversed but it is fraught with great danger.”
The economist said this new initiative could not have come at a worse time for Barbados.
Arthur recalled that the local agricultural and manufacturing industries were undermined in the early 1990s through the provision of NAFTA and the application of the new rules of International trade under the World Trade Organisation.
He also noted that the local International Business sector has lost of $250 million in revenue and foreign exchange earnings, after losing the Special Exempt Surplus Arrangement it enjoyed previously with Canada up to 2008. “The loss of Correspondent Banking relationship has seen the closure of 20 Offshore Banks. The new Base Erosion and Profit Shifting Initiative if not creatively and successfully addressed, can put a lot of the remaining international business sector under pressure.”
To this end, he reiterated that the danger that this new threat poses for Barbados is of very special significance. “For Barbados will go into an IMF programme in 2018 with the Sectoral Foundations of the economy in a far more vulnerable and fragile state than was the case when the Sandiford Administration sought the assistance of the Fund in 1992.”
“The future of our economy and society may therefore come to depend not only on how we master the design of our programme with the Fund. It may depend even more on how we address the challenges imposed on us by other international institutions to which we do not belong.”
“To have to grapple with implementing an IMF Enhanced Facility Fund Programme while fending off a challenge from the European Union or OECD is not a challenge for the faint heart. But it is the essence of the challenge that this country must confront and successfully meet over the short term,” he said. (JH)