It is still too early to tell how much Barbados will be affected by the decision by the majority of the world’s nations to enforce a corporate tax rate of at least 15 per cent, a spokesperson for the offshore business community said Monday.
Carmel Haynes, Executive Director of BIBA, the Association for Global Business, told Barbados TODAY the coming months will give a clearer indication of whether there will be a falloff of business as a result.
Last Friday, 136 countries agreed to the minimum tax rate amid concerns driven largely by the United States that multinational companies were re-routing profits through low-tax jurisdictions.
It was expected that Barbados, which has one of the lowest corporate income tax rates in the world at 5.5 per cent, would be at risk of losing much-needed business if it were to move to 15 per cent.
But the move – which is expected to hit digital giants like Amazon and Facebook – is aimed at firms with global sales above 20 billion euros and profit margins above 10 per cent.
Haynes told Barbados TODAY BIBA was paying close attention to the development, saying it was unclear how many of the affected companies operate in Barbados.
“BIBA continues to monitor closely the developments taking place toward the imposition of a global minimum corporate tax rate of 15 per cent,” she said. “We note that the expressed intention is for this tax to be levied on multinational companies with revenue over EUR 750 million, which, according to discussions we have had with the Ministry of International Business, is not a large proportion of the international financial services and global business sector of Barbados.
“We also note that model rules for implementation are expected to be available from the OECD next month and obviously the devil is in the details, so we should have a clearer idea of how it will be implemented and who will definitely be affected after that.
“I wouldn’t say that Barbados might not be significantly affected because those companies might be small in number but large in contribution depending on how much corporation tax, rents and salaries they contribute.
“The Ministry has not identified to us as yet which companies will be affected so I can’t really quantify the impact if those companies decide to pick up and relocate back home or another jurisdiction that is offering better advantages.”
Haynes said because the playing field had now been levelled Barbados needed to improve its competitiveness to attract those international companies.
“However, given that this will now be a worldwide undertaking, it means that the affected companies will have a wide choice of locations from which to conduct their business, and therefore, this means that all of Barbados, both private and public sector, must take a hard look at where we can improve our competitiveness socially, economically and financially.
“Not only do we want to ensure that the affected companies who might already be located here have reasons to stay, but we also want to be an attractive prospect for those entities who were located in other places purely for tax advantage but for whose principals now other issues will come to the fore, such as quality of life.”
Hailing the accord reached by the club of the world’s most powerful nations, the Organisation for Economic Cooperation and Development (OECD), Treasury Secretary Janet L. Yellen said Friday: “As of this morning, virtually the entire global economy has decided to end the race to the bottom on corporate taxation.” randybennett@barbadostoday.bb
