Barbados Prime Minister, David Thompson announced in his recent 2008 budget speech that the international business services sector would continue to be a major source of foreign exchange earnings, and he pledged to put in place tax and legal reforms to attract more regional and international companies to establish in the country.
Thompson told parliament in the budget speech on 7th July that more urgency will be placed on the negotiation of additional double taxation treaties and bilateral investment treaties between Barbados and other countries.
"Particular emphasis will be placed on negotiations with the countries of Latin America and Asia so that we have a network of treaties that straddles all major countries and positions us to compete with jurisdictions that have an extensive network of double taxation treaties," he announced.
Thompson also said that the government would put in place other new measures to improve the country's business competitiveness, with an emphasis on making the jurisdiction an attractive one for the setting up of corporate headquarters.
"These include tax benefits, immigration arrangements for senior and professional staff and their families, relaxation of exchange controls on capital transactions, bilateral investment treaties, dispute settlement arrangements, educational and health facilities and skills availability," he explained.
Thompson went on to announce that banks and insurance companies registered under the Mortgage Insurance Act, which provide low income loans on properties up to $150,000, will pay corporation tax at the reduced rate of 12.5% on profits earned from such loans.
He also announced that individuals earning up to $15,000 will be entitled to an increased reverse tax credit of $1,300, effective in the 2008 income year.
There were also a number of revenue raising measures in the budget designed to help cover the government's public spending commitments. These included an increase in the insurance premium tax by 1% in a bid to raise and additional $6.6mn a year, and increase in the fees paid by insurance companies from $5,000 per year to $20,000 per year. Justifying this increase, Thompson argued that the current fees paid by insurance companies are "very low figure for an industry that does so well financially from our economy."
Licence fees for financial institutions, which have not been increased for ten years, will also be raised from the 1st January, as follows: Local – main branch: $250,000 per bank; Local – other branches: $20,000 per additional branch; Local – ATM’s: $1000 per ATM other than at branches; International banks $100,000 per bank; and Trust companies $100,000 per company. These changes are estimated to yield $4.9 million in a full year.
The rates of the environmental levy have also been increased, from 1.5% and 2% to 2% and 3% respectively. The rate of environmental levy on both new and used cars will be standardized and will be fixed at the rate of $1,500 per vehicle.
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