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Bright Barbados Future

 

The only constant in life is change, and when you are a small international business and financial services centre (IBFCs) playing on a field where goal posts keep shifting, the ability to be nimble and adaptive is paramount. Barbados has enjoyed its status as an international jurisdiction of choice by many recognised multinational corporations for over 5 decades, not through luck or chance, but by being prepared to adapt its legislation, business incentives, and negotiating positions in the face of serious challenges from economic and policy changes happening elsewhere. Barbados is once again positioning itself to meet head on new changes to the global international business regime prompted by Organisation for Economic Cooperation and Development (OECD) rules. The changes coming will be momentous, but as with any dialectic, we expect a positive evolution in our position, as long as the necessary adaptations are made to take advantage of the future opportunities.

In 2013, the OECD turned its focused attention to Base Erosion and Profit Shifting to address perceived gaps that allowed multinational entities to shift profits from a jurisdiction where they would pay higher tax to ones where they could pay lower tax. No longer was tax evasion the villain but now tax avoidance was also firmly in the cross-hairs. While an undercurrent of panic started to run through conversations held in some IBFCs, especially ones with a zero tax value proposition, Barbados was getting more attention, but for a different reason. Barbados has always prided itself on being a ‘jurisdiction of substance’, not interested in a race to the bottom on tax incentives, but on providing a holistic package that cements this jurisdiction as the best place for international investors to live, work and play. A global tax regime that requires multinational entities to have substantial business activity in the jurisdictions in which they are registered plays to Barbados’ strengths.

Just as it has done with previous OECD challenges, the Barbados government has taken steps to ensure that the island is deemed compliant with all necessary requirements, while still being an attractive home for the mind and management of international entities. Authorities have undertaken a systematic review of its legislation and incentives related to international banks, insurance companies, trusts, societies with restricted liabilities, and ship registrations to ensure that they do not flout the BEPS rules. Barbados maintains an impressive network of Double Taxation Agreements (DTAs) and Tax Information Exchange Agreements (TIEAs) that are compliant with the OECD Global Forum standards, but also a network of Bilateral Investment Treaties (BITS) that can offer protection for those entities looking to make onward investments into riskier jurisdictions. Barbados holds the advantage of a well educated, highly skilled, cosmopolitan workforce that can capably service and manage the needs of the myriad of IBFS entities that seek to locate here. The island boasts an enviable history of political, socio-economic, exchange-rate, and weather stability, which creates a business environment safe from the threat of disruption under most circumstances. A regulatory environment that meets international best practice and a stable financial system that adheres to international obligations, along with a legislative framework that enables a range of international business products, are just some of the compelling reasons for Barbados’s bright future amidst all of the coming changes.

However, no matter how far ahead we are in the game, someone is always looking to steal our lunch. We cannot be complacent but have to seek to assure this bright future by ensuring that both the public and private sectors foster an enabling environment for new entities to be able to register and establish. Other competitor jurisdictions are investing in technology and public sector reform strategies to streamline establishment processes. However, Barbados has the platforms on which it could leapfrog over its competitors if the resources are thrown behind them. An E-Government framework already exists that could be pivoted to enable full business registration, report and tax filing, fees and other payments. The financial world is already looking with interest at blockchain technology to enable insurance and other financial transactions and Barbados has already started to build out significant capabilities in this area among the next generation of fintech experts. A number of dynamic new tourism and residential developments are underway that promise to transform the island and while Barbados has kept out of the mire that has bogged down some other neighbouring islands who offer citizenship by investment, we could reap significant knowledge and economic transfer benefits from our Special Entry and Reside Permit (SERP) programme through the effective implementation of immigration reform.

This year is an election year for Barbados and what the business community needs more than ever is a map to chart our way to that bright and shining future.

 

 

Written by Connie Smith, Managing Director, Tricor Caribbean Limited

Caribbean Corporate Services Ltd

 

Adapted from: Business Barbados, Twentieth Edition - 2018

 




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