The Institute of Chartered Accountants of Barbados (ICAB) has expressed disappointment over the lack of clarity in this year’s Budget regarding business investment incentives, warning that it could hinder Barbados’ future economic growth.
Responding to the Financial Statement and Budgetary Proposals unveiled on Monday by Minister in the Ministry of Finance Ryan Straughn, ICAB suggested that the Straughn budget has not helped to shed any further light on how it implement the incentives announced by Prime Minister Mia Mottley in her March 2024 speech.
“Nearly 12 months later, the mechanisms to take up these incentives and the credits have not yet been disclosed. A lack of clarity one year later reduces the impact of these incentives on Barbados’ potential future growth, and ICAB hopes that the government has also examined these implementation weaknesses and has taken steps to address them as they look to fulfil the 2025 proposals to the people of Barbados,” the institute declared.
The accountants’ body observed that while the 2024 measures included many incentives to stimulate investment and some growth, the 2025 Budget was a socially-minded one with the granting of the solidarity allowance of $300 per person, an increase in maternity leave to 14 weeks for a single birth for mothers, and the introduction of paternity leave of three weeks for fathers, regardless of whether the parents live together.
“In 2024 and again in 2025, ICAB’s proposals asked the government to consider several initiatives to simplify the process of filing late corporation and personal income tax returns, the settlement of penalties by the taxpayer, and the administration of taxes by the Barbados Revenue Authority. These initiatives included zero penalties on returns that are filed in the Tax Administration Management Information System or TAMIS with a nil balance, and a three- to five-day grace period between the filing of returns and the payment of the tax liability.
ICAB acknowledged that while the minister did not specifically refer to any of these initiatives in his presentation, it took note that he referred to a directive which he will issue at a later date on how the government plans to enhance efficiency and reduce the administrative burden of the Barbados Revenue Authority.
The institute said it looks forward to this directive, which it hopes will be issued very soon.
ICAB also addressed the increase in the personal allowance for pensioners to $50 000 and the removal of withholding taxes on investments in government bonds for registered retirement and pension plans.
It recalled that this year, ICAB and other service organisations asked the government to relook the treatment of pensions, as it was felt that the increase to $45 000 in 2024 was insufficient.
“ICAB welcomes an increase of $10 000 over the two-year period but is not convinced that it will be received well by all pensioners. Taxpayers who worked hard to maximise their pension benefits during their working life are still being taxed again on the income over $50 000,” the organisation pointed out.
The accounting entity also drew attention to the minister’s efforts to clarify the rate of taxation for small businesses, which he also addressed at ICAB’s Annual Tax Update in February.
It said Straughn reiterated that a small business is defined as a corporate entity that earns $2 million or less, has paid-up capital of $1 million or less, and has fewer than 25 employees.
“Small businesses would incur taxes of 5.5 per cent and would prepay taxes twice a year, as compared to those entities that incur taxes of 9.0 per cent and prepay taxes monthly. This statement made by the minister is in line with the Guidance Note 008/2025 published by the Barbados Revenue Authority earlier this year,” ICAB said.
However, the institute contended that the minister was silent on companies that are approved small businesses defined under the Small Business Development Act.
It pointed out that under the Small Business Development Act, a company does not have to meet all three criteria to be eligible. “Granted that an approved small business can still access the reduced rate of 5.5 per cent corporation tax and prepayments of twice a year, the two conflicting definitions between the Income Tax Act (which the minister represented will be updated for this newer definition) and the Small Business Development Act need to be addressed.”
ICAB noted the focus on creating a resilient Barbados, one that can recover from external economic or climate-related shocks. ICAB applauded these initiatives by the government with the repurposing of the Catastrophe Fund to create the Resilience and Regeneration Fund.
ICAB said it looks forward to the government sharing details on the structure, governance, and controls over the fund before it becomes operational.
“Finally, ICAB notes that several of the government’s proposals are to be enacted effective April 1, 2025; less than three weeks away. The removal of value-added tax on some items that have been added to the basket of goods, the change in the rate for contributions to the Resilience and Regeneration Fund, and the computation of the amount to be matched by employers are all changes that businesses will now have to contact their service providers, if that expertise is not in-house, to have made to their accounting systems.” (EJ)
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