- Tax expert urges Gov’t to shift stance on countries that blacklist Barbados
Despite Barbados coming off one tax blacklist last year, a tax watchdog of the world’s richest countries continues to keep the island on its list, highlighting areas requiring substantial improvement by the next annual monitoring, based on 2022 peer reviews, an international tax consultant said Tuesday.
But while urging that authorities and accountants “have work to do”, he also recommended a shift in stance towards the countries that attack Barbados as a tax haven: “We are certainly being watched. But it’s also time to flip the switch and watch them.”
Chairman of the Institute of Chartered Accountants of Barbados (ICAB)’ taxation committee Jason King said the focus has now shifted to the Organisation for Economic Co-operation and Development’s (OECD) Inclusive Framework on Base Erosion Profit Shifting (BEPS) 2.0, specifically pillars one and two.
BEPS is a tax planning strategy used by multinational corporations (MNCs) to shift their profits from a high-tax jurisdiction to a low-tax or no-tax jurisdiction. It has been continuously evolving to develop an agreement on a two-pillar approach to help address tax avoidance, ensure coherence of international tax rules, and, ultimately, a more transparent tax environment.
BEPS, Pillar One, which applies to large multinationals, will reallocate certain amounts of taxable income to market jurisdictions, resulting in a change in effective tax rate and cash tax obligations, as well as an impact on current transfer pricing arrangements. Pillar Two aims to ensure that income is taxed at an appropriate rate and has several complicated mechanisms to ensure this tax is paid, said King.
King told ICAB’s Annual Tax Update at the Lloyd Erskine Sandiford Centre on Tuesday that lingering concerns from the OECD’s Forum for Harmful Tax Practices (FHTP) required ongoing vigilance.
“Those of us who in the past have been classified as tax havens continue the fight, and I know earlier last year, we came off one list but as recently as of last week, with an update from the Forum for Harmful Tax Practices, we remain on that list,” he said. “We are classified as having areas which need to be substantially improved by the next annual monitoring. We have work to do on statistical data compliance programme and making sure that that is successful and proper exchanges of information, and this all relates to those two words which have been a hot topic for the last year economic substance.”
The ICAB taxation committee chair told members that recent draft legislation proposed a nine per cent rate.
“The proposal rate of nine per cent is not a miracle number,” he said. “What I can say to you is that it appears that that will assist and bring us off that FHTP list as it did for the United Arab Emirates when they implemented a corporation tax regime and implemented that 9 per cent rate during the middle of 2023. It means that we need to continue to look at our tax policy.”
King stressed the need for a proactive and equitable tax policy that is simple, fair, clear, convenient and sustainable.
He also urged authorities to be less reactive and shift towards initiating tax policy through legislation.
“We have been relying too much on what is going on on the outside and being reactive. Where will we be in another year? Will we be hoping that directives and boardrooms are such that they don’t affect our tax policy or entity politics . . . [and] that it doesn’t drive our tax policy or the watchdog agencies don’t drive our tax policy?
