E&Y Urges More Action On Barbadian Economic Reforms

by Amanda Banks, Tax-News.com, London

24 April 2003

Addressing the Ernst and Young Caribbean Business Outlook conference in Barbados last week, office managing director, Ben Arrindell urged the government and the finance industry to put into action much discussed plans on critical issues facing the offshore sector.

According to the Barbados Daily Nation, Arrindell argued that it is now time to "get on with some action", adding: “I think we need a clear strategy for the sector and we need an implementation plan with some timelines. And we need to set ourselves some measures and be prepared to measure ourselves against the targets we set.”

Though the number of licences granted to new international businesses had seen an increase by the end of last year, the recent Caribbean Business Outlook survey conducted by E&Y revealed that business confidence in general had slumped, down from 59% in 2001 to 38% in 2002. There are currently 7,600 offshore companies registered in Barbados employing some 3,000 people, which results in $110 million flowing into the island annually.

Arrindell cited bad publicity as a result of the additional scrutiny of offshore jurisdictions by the OECD and the FATF (Financial Action Task Force) as a major reason for the drop in confidence in the Island. However, the fact that Barbados has now been removed from the harmful tax centre list should be used to the country's advantage, according to Arrindell.

He also argued that more should be done to exploit the potential of the telecoms sector, which has recently been deregulated to allow for greater competition. This has afforded the offshore industry "tremendous opportunities" Arrindell observed.

"The government’s introduction of a new telecommunications framework, increased competition and the lowering of international telecommunications costs, will not only enable the enhancement of that infrastructure but have a direct positive impact on the financial services sector," the Ernst & Young survey revealed.

The E&Y representative also saw scope for new bilateral treaties, in particular with South American nations and EU member states.

Tax treaties and lower tax rates with the United States and Canada have been a major factor in the development of the offshore sector which is now second only to the tourist industry in terms of foreign exchange earnings, according to reports.

On tax harmonisation, the survey revealed a divided response, with half those polled believing it would be beneficial, although most of those (44%) felt that the matter was not receiving adequate attention. Some 45% would like to see a single tax rate levied between 5 and 10 per cent whilst 23% think a rate of up to 5% would suffice. Some 18% of respondents wanted a single tax rate of between 20 and 25 per cent.

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