22/07/21

INTERNATIONAL TAX: Joint CARICOM position on ‘complex’ global minimum tax proposal expected.

As published on newsroom.gy, Thursday 22 July, 2021.

Guyana will join other countries within the Caribbean Community (CARICOM) to discuss the implications the proposed 15 per cent global corporate minimum tax rate will have on the Caribbean region, with the view of crafting a joint statement on the matter.

This is according to the Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh, while responding to questions from the News Room at the sidelines of a recent event.

The global corporate tax rate, proposed by the United States President Joseph Biden, has found favour with 130 countries and it is envisioned that it would be implemented by 2023 after the terms of the agreement are finalised later this year.

Despite the widespread favour of this global tax rate, some countries are not entirely supportive. In fact, Chairman of the Caribbean Community (CARICOM), Gaston Browne expressed his concerns over this tax rate during a recent meeting of Heads of Government of CARICOM.

According to him, this tax rate could possibly make small states uncompetitive and it may harm the economies of those countries that use taxation policies as legitimate instruments to better compensate for smaller market size, remote locations, lack of resources and an industrial disadvantage.

At a later press conference, he explained further, “The reality is that many of our countries, we have low-tax offshore sectors and the introduction of a 15 per cent (global minimum corporate tax) will result in a significant reduction of revenues and that in itself could undermine the development of respective countries and respective peoples.”

As such, Browne, who is the Prime Minister of Antigua and Barbuda, said that CARICOM leaders would meet before the end of July and discuss a possible “carve-out” or “compensatory mechanism” for Caribbean countries.

Ahead of that meeting, Dr. Singh was asked about Guyana’s position on the tax rate. And, the Finance Minister said that it is a “very complex” issue with many factors to consider.

Explaining this further, he said, “I think we are well aware of the arguments at the international level regarding tax competition but there are other dimensions to this issue including the various instruments that are used by countries for the purposes of competition for investment and the global investment space and the issues of fiscal sovereignty over economic policy decisions, etcetera.”

It is for this reason, he stated, that the proposition will engage the Finance Ministers and the Heads of Government of CARICOM. Thereafter, a “CARICOM wide position” is expected to be developed.

When asked if Guyana supports the “carve-out” or “compensatory mechanism”, Dr. Singh only said that he does not want to preempt the discussions that will take place at the CARICOM level.

Already, however, some Caribbean countries including Jamaica have expressed their support for the global minimum tax rate. Contrastingly, Barbados and St Vincent and the Grenadines are two of nine countries that did not come into agreement, however.