Government is making legislative changes to the corporate tax regime to ensure Barbados conforms to global standards and is able to take advantage of increased opportunities for local and international investment.
Leading off debate in the House of Assembly on Tuesday on the Corporation Top-up Tax Bill, 2024 and the Income Tax (Amendment) Bill, 2024, Minister in the Ministry of Finance and Economic Affairs Ryan
Straughn said the changes give effect to an earlier decision to move away from the sliding scale for corporate taxes introduced in December 2018 to replace it with a new structure.
He explained to his parliamentary colleagues that there would now be a domestic tax rate of nine per cent for businesses operating in Barbados which would apply to all except those small operations registered under the Small Business Development Act which will be taxed at 5.5 per cent.
However, he explained that companies that make above an US$850 million threshold will be impacted by the top-up tax.
Companies will also have until January 2025 to comply with the global tax policy. Those companies whose original jurisdictions have not already implemented the changes in the tax laws, will remain on the “old” sliding tax structure during the 2024 transition period only.
Touting the “strong” leadership of the current government as a prerequisite to “getting it right”, he said it makes a difference to the conduct of business in Barbados by locals and those who come from abroad to invest here.
The economist noted that the Barbados Economic Recovery and Transformation Programme (BERT) which was put in place in 2018 continues despite the reputational and fiscal damage caused by the last
administration.
According to Straughn, the government has sought over the last six years to move away from a consistent increase in taxes to a more stable regime that would allow for foreign investment while encouraging local business development to “unlock opportunities” that would ensure Barbados can recover its economic footing in an inclusive manner, build resilience and achieve climate resilience.
“The pieces of legislation are aligned with what we are trying to achieve in terms of being able to utilise regulations which are agreed at a global level, to be able to reposition Barbados for inclusive growth.
“…As we seek to do the traditional sources of financing, we must be capable of using the tax system to unlock areas of investment that are strategically aligned with the national objectives particularly as it
relates to building capacity for growth and to allow our citizens to be able to invest to be a part of the recovery,” Straughn said.
He cited marathon discussions with domestic and foreign interests to get Barbados off international blacklists and enhance the ability to do business, as the country’s reputation was previously downgraded 23 times due to perceived unworthiness to borrow internationally without significant costs.
Straughn, the Member of Parliament for Christ Church East Central, recalled that the current administration had to move quickly to reform Barbados’ tax system on assuming office in 2018 to rebuild this country’s reputation as it entered a programme supported by the International Monetary
Fund (IMF).
“Given the commitment of the previous administration (to dismantle the tax structure) we had no choice but to move to a direction where we converged all of the tax rates in order to create a platform where there is a relatively stable environment,” he said.
According to him, since then, the world has agreed that firms operating globally which earn more than 750 million Euros (US$850 million) should be required to pay a global minimum tax irrespective of where they operate.
He explained: “Barbados is a part of that framework in relation to ensuring that these entities all pay their fair share of taxes. When we had our Corporation Tax rates at around 25-30 per cent, we had a range of allowances…. The number of loopholes that allow entities to offset the tax that they pay are so large that it effectively makes a mockery of the nominal tax rate, given the quantum of allowances that are allowed in relation to expenses to be deducted.”
Straughn added that when Barbados converged its tax structure, it simplified the allowance system and focused on research and development and training in order to address these critical areas.
The new focus is mobilising private resources for Barbados’ climate resilience efforts and sustainable development goals, the minister said.
(SP)
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