Time For Barbados To Unify The Company Tax System?

by Amanda Banks, Tax-News.com, London

11 August 2004

The newly elected president of the Barbados Financial Services Board, Penny Ettinger, has suggested that the gap in tax rates between local and international businesses be narrowed as a step towards a converged tax system and improved national competitiveness.

According to a report in the Barbados Daily Nation, Ettinger, a former offshore banker and Canadian tax lawyer, said this could be achieved through a 2.5% rise in the current maximum rate paid by businesses in the offshore sector, in tandem with a larger reduction in the rate now paid by local companies from 25% to below 10%.

This would have the effect of appeasing onshore governments and putting the jurisdiction in a better position to negotiate new tax treaties whilst transforming the jurisdiction into one of the most competitive in the Caricom region for local firms, she argued.

However, Ettinger acknowledged that an attempt to narrow or harmonise tax rates would need to be approached carefully by the government.

“For the Barbados Government to consider reducing the corporate tax rate overall from 25% to seven or eight per cent is going to be difficult, but on the other hand, of all the corporate tax collected in Barbados, 40% comes from the international business sector,” she observed.

Pointing to Ireland, Ettinger said there are successful precedents for the merging of dual tax systems.

However, acknowledging that a convergence of the tax system may initially deter new business and provoke some existing international businesses to leave, the BFSB president advised the government to implement such reforms slowly, over at least four or five years, whilst also bringing down the cost of doing business in Barbados.

Recommended