23/03/22

BARBADOS: No plans to change corporation tax rate.

As published on barbadostoday.bb, Wednesday 23 March, 2022.

Multinational corporations in Barbados are being given the assurance that Government has no intention of adjusting the current tax rate of between one and 5.5 per cent, as fears continue to grow over the imminent 15 per cent global minimum tax threshold.

Pointing out that there were talks of some companies considering leaving Barbados, Kevin Hunte, Director of International Business in the Ministry of Energy and Business Development, said Government was engaging officials at the level of the Organisation for Economic Co-operation and Development (OECD) to get further clarification on the planned global minimum tax rate.

“What I can tell you is that there is, at this time, no plan . . . to change the current tax rate relative to corporation tax from its sliding scale of 5.5 per cent down to one per cent to an across the board 15 per cent corporate tax. That is not what is being proposed,” Hunte told scores of attendees at day two of the Barbados Risk and Insurance Management Conference at the Hilton Resort.

He further gave the assurance that a high-level team was “close” to making certain recommendations to Prime Minister Mia Mottley, who is also Minister of Finance and Cabinet, and once that was completed operators in the global business sector would be informed of those proposals relating to the planned 15 per cent global corporate minimum tax rate.

Hunte, who was responding to concerns expressed in another section of the Press about the lack of discourse on the matter in the recent Budget presentation, said in addition to Barbados, a number of other countries had various concerns about different aspects of the OECD’s two-pillar plan to reform the international taxation rules, which is to be implemented by 2023.

Pillar one of the planned reform addresses the development of a framework for taxation of the digital economy and will reallocate profits of large multinational enterprises, with global sales of €20 billion and profit margin of 10 per cent or more, from their home countries to the market jurisdiction where their users and customers are located.

Pillar two is the introduction of the 15 per cent global minimum corporate tax rate for companies with revenue above €750 million regardless of where they are headquartered or from where they operate. This is designed to combat Base Erosion and Profit Shifting (BEPS).

Barbados joined more than 130 other countries in signing on to the new OECD taxation rules that it said was to ensure that multinational firms pay what it considers a fair share of tax wherever they operate.

Hunte told the conference participants that he was aware some entities are contemplating leaving because Barbados has not made its position clear relative to the global minimum corporate tax rate.

However, indicating that there was uncertainty globally, Hunte said “We will not be hastening to make certain statements and we do not have concrete positions coming from the OECD at this time.

“I can give you the assurance that we are not ignoring it, I can give you the assurance that it is actively being worked upon, tracked and followed, drawing from a wide cross section of expertise both from government and the private sector,” he stressed.

“Contrary to popular belief in some quarters, the government is tracking what is happening with respect to the taxation on the digital economy and its further implications relative to the global minimum corporate tax rate,” he added.

He explained that representatives from Barbados were participating in various meetings with the OECD and there was a lot of information, “suggestions, concerns [and] proposals that are emanating from these meetings”.

Pointing out that the framework for both pillars of the framework were changing regularly, Hunte said that was the main reason behind government not making any specific statements just yet.

“We are also mindful of various political maneuvers,” he added.

He said “at the appropriate time” authorities will make all information known and ensure there was inclusion and discussion on the matter.

Highlighting some of the concerns that countries have regarding the measure, Hunte said this included the absence of mechanisms to avoid double taxation and lack of clarification on proposed approaches to the allocation process.

He said there were also concerns that countries were favouring varying approaches relative to the tax computation and there was “a quest for clarity” about the burden that would be placed on some tax administrations, particularly jurisdictions such as Barbados.

There is also no agreement on sanctions to be imposed when a multinational enterprise is uncooperative with respect to how it approaches revenue sourcing, he added.

He said there were also several challenges in the EU including a recent failure for ministers of finance in that bloc to agree on some directives relating to pillar two, stemming from the lack of agreement on a temporary opt-out proposal.

Hunte noted that there have been calls for the deadline for implementation to be extended by a year.

He told the audience that the OECD was scheduled to hold public consultations on April 11 and invite feedback and discussion on April 22.

“We can see that there are significant challenges, significant areas that are not settled as yet. Therefore it would be premature for government to make certain definitive statements relative to this particular area,” said Hunte.