The casual visitor to Barbados over the last ten years may have observed and perceived the calm and sobriety of a well ordered and structured jurisdiction. While those characteristics may typify the average Barbadian, although not always Barbados itself, they may have masked a rising set of fiscal and monetary concerns of national indebtedness.
In May 2018, the Barbadian electorate expressed these concerns by giving the opposition party of the time a sweeping victory to win all 30 seats in the island’s parliament – a feat unprecedented in Barbados’s electoral history. The new government, under Prime Minister Mia Mottley, immediately set to work on an operation of financial and socio-economic rebuilding at various national levels.
On 8 September 2018 Barbados announced that it would be benefitting from approximately US$300 million under an Extended Fund Facility (EFF) programme with the International Monetary Fund. The four year programme is likely to suit countries planning longer term, and funds will accordingly be drawn in eight tranches. The fund aims to rebuild international reserves quickly and, in so doing, return confidence to international and domestic lenders and investors. The overall government policy is now focussed on a comprehensive debt restructuring programme anchored in its June 2018 announcement to suspend payments on external commercial debts, and restructure both domestic and external debt. To that end, the Barbados government has been engaged in discussions with both external and domestic creditors, including the National Insurance Scheme, commercial banks, insurance companies and the credit unions – all in an effort to fashion a debt restructuring programme with maximum feasible acceptance. Central to these discussions are plans to fashion a programme that will reduce the annual debt service cost, which extends the length of the loans. All parties are engaged in the process and are working assiduously to achieve its aims.
The International Business Dimension
Barbados has been subjected to the strictures of the international environment and to the timelines which require it to modify aspects of its legislation to conform with the new best practice. The Base Erosion and Profit Shifting (BEPS) Action Plan has identified 15 actions to address BEPS in a comprehensive manner, endorsed by the G20 finance ministers in October 2015. Specifically, the Action 5 Report which seeks to counter harmful tax practices more effectively by taking into account transparency and substance is one of the four minimum standards established by BEPS. Each of the four BEPS minimum standards is subject to peer review by the Forum on Harmful Tax Practices (FHTP) in order to ensure timely and accurate implementation and thus safeguard the level playing field. All members of the inclusive Framework on BEPS have committed to implementing the Action 5 minimum standard and to participating in the peer review.
The minimum standard of the Action 5 Report consists of two parts. One part attempts to revamp the work on harmful tax practices with a priority on improving transparency, including compulsory spontaneous exchange on rulings relating to preferential regimes. The other part focusses on requiring substantial activity for any professional regime. In determining whether the first part of the standard has been met, the FHTP promises a holistic approach to the evaluation of a country's preferential tax regimes and will engage with non-OECD members on the basis of the existing framework. It will consider revisions or additions to the existing framework. Barbados has been considered by the OECD to have a preferential regime which is available to certain entities deemed potentially harmful, and the Barbados government has committed to amending some of the regimes and abolishing others by 31 December 2018.
A task force of Barbadian professionals has provided a set of recommendations which, if accepted by government, and hopefully by the OECD and its international ‘allies’, will significantly transform the Barbadian legislative footprint. It will make the jurisdiction more competitive and essentially more easily marketed to high-net-worth individuals, international business vehicles, and internationally mobile capital generally.
Ongoing Positive Developments
The ongoing work of the recently launched International Securities Market (ISM) by the Barbados Stock Exchange is an important boon to the nation's economy. This market remains a vehicle for the listing and trading of securities of issuers who may or may not be incorporated in Barbados and who may otherwise have been listed or traded on other exchanges around the world, such as, for example, the second tier markets of Canada, the US and the UK. This new development gives expanded legal status to the provision of a seat for exempt securities which, as early as 1989, was established in Barbados when on behalf of a major Canadian enterprise, an accommodation was made to allow its local Barbados IBC to trade on the Hong Kong exchange without question or recourse. The ISM is now capable of attracting new types of international businesses to Barbados. It is encouraging the use of the jurisdiction’s double tax treaties and is allowing new types of businesses to participate, including listing sponsors. Its core products are equities, bonds and other fixed interest securities, as well as mutual funds. The advantages remain many. The ISM will extend the new Barbados international business sector’s range of products after the OECD legislative revamp.
The Arbitration and Mediation Court of the Caribbean (AMCC) was launched in the last quarter of 2017 and remains a very positive development. With the promulgating of its rules in February 2018, and the publication of its dispute resolution panels, it is yet another important regional and international institution headquartered in Barbados with a wide global range of professional service delivery. The AMCC has now published its list of arbitrators and mediators, which represents a multi-disciplined roster of professionals of varying geographic scope.
Barbados also continues to excel in the use of its Societies with Restricted Liability (SRL) legislation. It has given the Companies Act, 1982 a flexibility of use and application which is particularly attractive to American parents who want to enjoy the benefits of a flow-through subsidiary which may in part be treated as a partnership. It is not replicated in other comparable jurisdictions and continues to give Barbados a strong advantage as was evidenced in November and December of 2016 with the advent of extraterritorial anti-hybrid legislation. Since that important start, more companies with similar business plans have established in Barbados. In so many instances, the recognition and suitability of the Barbados SRL is evidenced by the many local incorporations which now exist, and significantly these are legal entities which pay taxes that support the local economy.. With the necessary changes to accommodate the new OECD requirements, this legislation will have even more relevance and marketability.
Other new legislation is still under active consideration. The negotiating of co-production treaties with jurisdictions such as Canada, New Zealand, Britain, the US and others could significantly benefit the local film industry. It is an industry which has great ramifications for transfer of technology and skills, substantial income generation, and the furtherance of youth opportunities. Barbados is hosting its third annual Independent Film Festival in January 2019. It continues to attract a growing number of independent films and filmmakers, as well as many from the established film industry.
In a time of drastic changes, it is the learners who inherit the future.
The learned usually find themselves equipped to live in a world that
no longer exists.
In 2018, Barbados took some notice of Hoffer's admonition. The Government of Barbados is working hard to institute fundamental changes to the structure of its international business architecture. It recognises that, for Barbados’s international financial sector to remain competitive, innovation and change must be ongoing – there is no alternative.
Sir Trevor Carmichael QC
Sir Trevor Carmichael, KA,LVO,QC. was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica. After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados Chapter of the International Fiscal Association of which he is Charter President. He is the Barbados Country Chairman of the International Litigation Committee on Business Law of the International Bar Association and a former Deputy Secretary General of the International Bar Association. He is a Life Fellow of the Institute for Advanced Legal Studies in the United Kingdom, a Life Member of the Commonwealth Magistrates and Judges Association and a member of the International Law Association.