Barbados's tax regime must undergo some quite radical changes in the years ahead as the country aims to become compliant with the commitments of the CSME (Caribbean Single Market and Economy), and the government potentially faces quite significant losses in its revenue stream as a consequence.
According to a report in the Barbados Nation News, the country stands to lose between $75 million and $100 million in GDP as a result of tax changes already proposed and others in the pipeline as the government attempts to put the key principles of the CSME in place for the end of 2004.
Moreover, the tax cuts recently announced the Barbados Labour Party election manifesto will cost the country further in terms of revenue. "Insofar as Barbados will function as part of a Caribbean Single Market and Economy (CSME) after 2004, we must structure our tax system to be the most competitive in the region, and to make Barbados the preferred business centre in the Caribbean," announced Prime Minister Owen Arthur in the manifesto. Some of the major measures include:
- Increase personal allowance from $15,000 to $25,000 over four years by annual increments of $2,500, starting in income year 2004.
- Reduce the basic rate of income tax from 25% to 22.5% in 2003 and to 20% in 2004.
- Reduce the top rate applicable to taxable income in excess of $24,000 from 40% to 37.5% in income year 2005, and from 37.5% to 35% in income year 2006.
Nation News reports that the changes in personal allowances alone will cost the government $86 million in lost revenue whilst a reduction in corporate tax from 40% to 25% by 2006 will cost a further $56.2 million.
Though some have criticised Barbados's policy of trying to achieve both tax convergence and tax harmonisation in its reform plans, Permanent Secretary at the Ministry of Finance, William Layne considers the policy sound.
“Convergence is a national issue and even though at the regional level you can agree on tax harmonisation, you cannot escape the fact that tax policy is a responsibility of a national government and will always be driven by national economic circumstances,” Layne observed whilst presenting a status report on the tax reforms, adding:
“The objective of tax harmonisation within CSME is, therefore, the stabilisation of members’ tax revenues, the smooth functioning of the internal market and promotion of employment,” the permanent secretary said.
One of the most crucial issues policy makers are facing is the issue of a single corporate tax for both the domestic and offshore sectors. Given that the offshore sector contributes $200 million to the island's economic activity, setting a favourable level for offshore firms whilst maintaining an adequate revenue stream is clearly going to be a difficult balancing act.
“The risk that 95 per cent of corporation tax revenue would be dependent on a sector that is subject to fiscal interventions that are external, given the country’s external network of social services, plus potential volatility of tax revenue must not be taken lightly,” Layne warns.
.
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment