There is also the question of whether global reforms could disadvantage Canadian-based multinationals, which have increasingly looking to offshore jurisdictions, most notably Barbados, as conduits to invest overseas. More than $60-billion flows through or is kept in Barbados, where the corporate income tax rate is 2.5 per cent. While some of that is private wealth being stowed offshore, much of the money is being used by Canadian companies doing business in other countries around the world – Global watchdogs take on the corporate tax dodgers
There was a time when tax treaties with little islands like Barbados gave the opportunity to foreign companies (captive insurance) to exploit tax structures to secure profit. In a post OECD active world, developing countries including Barbados, have had to withstand the piercing glare of the most powerful countries in the world. In is instructive this weekend finance ministers from the world’s 20 largest economies have gathered in Australia AND the main agenda item if you are curious? “ To to squeeze billions of dollars more in taxes from the world’s largest companies … to plug the gaping loopholes in the international tax system that allow multinationals to slide substantial profits into tax havens or low-tax countries, depriving governments of badly-needed revenue”.
It is an open secret the opinion OECD counties hold for countries like Barbados who use double taxation treaties to lure multinationals from developed countries. Minister Donville Inniss, as is his wont, has voiced his displeasure at the OECD moving the ‘goal post’. The world’s powerful countries are intent on blocking flight of capital from their jurisdictions and Inniss can continue to utter his usual high level of political rhetoric, there is not one iota he can do about it.
The International Business (IB) sector in Barbados is reliant on Canada for a significant share of its business. Because Canada’s economy has been faring better than the US, Europe and other countries across the globe Canada Revenue Agency (Canadian government) has not been as aggressive to shine a light on Canadian multinationals engaged in tax avoidance activities across the globe.
Tourism and the IB sectors are the only significant drivers of the local economy. Growth in the tourism and IB sectors have been anaemic in the last five years mainly caused by a weak external environment interacting with lethargic strategy and tactical responses from government. It is clear the intent of the meeting in Australia this weekend, significant changes are coming and have been signalled for a long time. If countries like Barbados are to sustain a standard of living we have become accustomed, we must proceed to make seismic strategy shifts in quick time.
All accept there is merit in the benefit of a double taxation treaty designed to prevent multinational entities paying tax on profit in multiple jurisdictions in which they operate. However the OECD is of the view the landscape in which multinationals operate has become too complicated and has given rise to a cadre of high priced accountants and lawyers whose key accountability is to exploit the system for the benefit of the multinational at the expense of the home country. It is a space where several countries have seen the opportunity to create economic activity by lowering the bar to become no-tax or low-tax jurisdictions. “Tiny Barbados, for example, is the third most popular destination for investment flowing from Canada, just behind more obvious destinations such as the United States and Britain.”
A regret of BU is the paucity of financial reporting in the Barbados media space. This was exemplified recently by the Governor of the Central Bank cancelling quarterly press conferences in favour of a staged show hosted by his friend veteran journalist David Ellis. It does not speak well about the level of investment in education we have not been able to facilitate an environment where young MBA or similarly credentialed Barbadians should feel encouraged to aspire to be media practitioners.
The world is changing apace, maintaining existing or even establishing new double taxation treaties will NOT make for better.