Direct Tax Reform Anticipated In Barbados

by Amanda Banks, Tax-News.com, London

09 October 2002

There has been speculation in the local media over the content of Barbados Prime Minister, Owen Arthur's forthcoming annual statement of Economic Policies and Proposals.

The Prime Minister recently indicated that he is considering addressing the local direct tax regime, which has not been adjusted for a decade. Speaking at a national consultation on the economy, he explained that:

'The time is now upon us to put in place a new direct tax regime and a new structure for the income and corporation tax that can be of service for the next ten years, at least.'

The Barbados Daily Nation went on to quote Mr Arthur as adding that any direct tax reforms 'must not only be influenced by domestic considerations, of corrections for inflation and 'income creep', but must also ensure that Barbados does not lose ground in the regional economy simply because its tax arrangements are out of line with its trading partners'.

Personal income tax is currently levied at two rates, 25% and 40%. However, in view of the rapid economic development which has taken place in the jurisdiction since these levels were set, some experts and media commentators have suggested that the bands need to be re-examined.

'Arthur may want to raise both bands by a few percentage points, at the same time raising the personal income tax threshold to $18,000 from the current level of $15,000,' the Daily Nation suggested on Tuesday, arguing that: 'This could hardly be a burden on government's revenue since this would provide the low-income earner with more discretionary spending income that would be caught in the value added tax net in any case.'

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