Barbados' Offshore Businesses Unphased By Owen Arthur's Tax Convergence Plans

by Amanda Banks, Tax-News.com, Barbados

06 November 2002

According to a report published in the Barbados Daily Nation on Tuesday, the jurisdiction's offshore businesses are not yet too concerned about plans unveiled in Prime Minister, Owen Arthur's recent budget to converge the corporate tax rates between offshore and domestic businesses at some point in the future.

'It is really too soon to tell what impact any new tax for the offshore sector would have on the industry since there is no real figure to consider, George Gleadall, President of the Barbados International Business Association explained.

In his 2003-04 budget, Mr Arthur announced plans for a phased corporate tax reduction for domestic companies from 37.5% to 25% by 2006, but stressed the parallel need for consideration to be given to achieving some level of convergence in the taxation of offshore and local companies as soon as possible.

This was welcomed by Ernst & Young Barbados, which observed in its analysis of the budget that: 'The recognition of the need for Barbados to become more competitive internationally is a step in the right direction. In this context, the decision to move to a common, converged rate of tax for all businesses, whether they operate in the domestic or international business and financial services sector is of great significance.'

'The recent discussions with the US with regard to the US/Barbados tax treaty and the ongoing discussions with the Canadian government in connection with its tax treaty with Barbados have highlighted the need to proceed with this initiative as quickly as possible.'

According to Mr Gleadall, the jurisdiction's offshore sector has chosen to adopt a wait-and-see approach: 'Any new tax would be a disincentive to some [companies] and would not affect others depending on how they were set up and what they want. Every company is unique in what it wants,' he explained to the Daily Nation.

However, speaking with regard to the challenges presented by rival jurisdictions such as Bermuda and the Cayman Islands, he observed that:

'These islands have an advantage because of the way they emerged as overseas territories with small populations, no industrial base to speak of and do not need the level of taxation to sustain the social systems that Barbados must do.'

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