Take swift action
Tuesday February 08 2011 | 07:07 AM

BARBADOS should not only move with haste to amend its Income Tax laws to address issues raised by the recently published Global Forum report challenging its transparency, but should also mount an aggressive lobby with its global partners to avoid damage to its international reputation and its international financial services sector, the country’s second largest foreign exchange earner and largest contributor to corporate tax revenues.

CEO of Invest Barbados, Wayne Kirton, endorses this two-pronged approach to ensure that Barbados’ right, as a sovereign nation, to determine its own strategic development strategy is acknowledged.

His comments are in response to a recent Phase One assessment report by the Global Forum, which concluded that while Barbados has made excellent progress towards meeting the OECD tax standard, technically, the country does not currently meet the standard.

Last week Prime Minister Freundel Stuart, in expressing disappointment with the Global Forum conclusions, revealed that the Income Tax Act will be amended to provide a domestic law basis for exchanging tax information with existing Double Taxation Agreement (DTA) treaty partners.

Kirton said that the peer review report raised four principal issues that led them to their conclusion.

The first is that although some older tax treaties contain tax information clauses, they do not meet the current OECD standard Article 26 on tax information exchange, even though the relevant treaty partners may have been approached to negotiate an upgrade.

The second is that in spite of the presence of the current OECD Article 26 clause in a number of the treaties in place, some treaties contain “carve out” clauses (requested by the treaty partner, not Barbados) in respect of International Business Companies, which meant that information on all companies is not available for exchange.

Thirdly, while Barbados has negotiated and signed a number of DTAs in the last 18 months, 9 of those have not been ratified by Barbados’ treaty partners as yet.

The fourth issue raised was that some OECD members had approached Barbados for Tax Information exchange Agreements (TIEAs), and were offered full DTAs instead, which were turned down by those members.

“Changing the Income Tax Act as proposed should be sufficient to address the Global Forum concerns and allow us to progress to the next phase of assessment,” Kirton told the Barbados Advocate in an exclusive interview.

“However, there is a lot at stake here in terms of both the future of our international business sector as well as our reputation and investment brand, and we have recommended that intervention at the diplomatic level, preferably led by our Prime Minister and/or senior Ministers, is required so as to put Barbados’ case to their counterparts in OECD and Global Forum countries, and to make sure that Barbados’ position is clearly understood,” Kirton said.

“The message that Barbados has a sovereign right to determine its own development strategy, and that the negotiation of DTAs and bilateral investment treaties which encourage and facilitate trade and investment, is preferable to the negotiation of a TIEA, and achieves the same tax information exchange and transparency goals, needs to be presented at the highest levels and on an urgent basis. There is a critical timeline here as well, and we only have about a month to act, if we are to be effective,” said the top Invest Barbados official.

Kirton said that, like many in the international business community, he had difficulty understanding the logic of the Global Forum conclusions, where a treaty-based jurisdiction like Barbados could now find itself challenged as not being transparent enough for the OECD, while other jurisdictions that had never exchanged tax information before are allowed to go forward to Phase Two assessment.

He noted the irony in the fact that Barbados is currently ranked by Transparency International as the second most transparent and least corrupt country in the Americas after Canada, and as No.1 in Latin America and the Caribbean, and has routinely exchanged tax information with its treaty partners for many years.

“The action proposed by our Government adequately addresses the first three points raised by the Global Forum, and takes away our dependency on the timely actions of our treaty partners.” said Kirton. He added that the fourth issue could be viewed as a direct challenge to our right to be the firm craftsmen of our fate, to which the national anthem speaks, and that right should be defended with commensurate vigour and speed.