Senator Eastmond. The Canadian Government Intends to Eliminate Double Dipping – How Will Your Ministry Respond?

Another Ditty from Brian PallisterMugshot

He’s not just the chairman of the powerful finance committee. He’s also a song-writer, well sort of.

With Finance Minister Jim Flaherty’s supposed crackdown on tax havens in the news today, here’s what the Portage-Lisgar MP had to say — or sing.

And a 1 and a 2 and a …

Cheat to Cheat

 (with apologies to Irving Berlin)

Haven, I’m in Haven,
And I pay no taxes so I can compete,
Liberal Loopholes make it such a simple feat.
Trickling down to my Barbados Tax Retreat.
Haven, I’m in Haven.
Please excuse me if it sounds like my conceit.
Some pay taxes but for me they’re obsolete.
Trickling down to my Barbados Tax Retreat.

Well I love to have fine health care,
And good pavement on my street.
But it doesn’t thrill me half as much,
As the taxes I can beat.The Waiters wait on tables,
And the farmers grow their wheat
And the losers pay their taxes,
While I live on easy street.

Haven, I’m in Haven.
You stay home and pay your taxes, don’t you cheat.
But come visit, drinks are on me, no receipt,
Trickling down to my Barbados Tax Retreat.

Haven, I’m in Haven.
And I love to gaze upon my balance sheet.
It’s so sweet to be the Corporate Elite,
Trickling down to my Barbados Tax Retreat.

Source: The Paper Boy

Minister Lynette Eastmond

A boast of the current administration is the growth of the offshore sector and specifically the International Business Companies (IBC’s). BU did a Google and the website informs that there are approximately 1000 IBC’s operating in Barbados. People in the sector readily admit that the majority of the IBCs and Captive Insurance companies originate from Canada because of the generous double taxation treaty arrangement which has been in position for some years now. It is known that Barbados has enjoyed a healthy relationship with Canada since the days of the late Canadian Prime Minister Pierre Trudeau. The bad news is that Barbados as a tax haven or nest to Canadian companies- whatever we chose to call it days maybe numbered.

Today the Canadian Press reported the Finance Minister Flaherty as saying the following:

“But Finance Minister Jim Flaherty remained adamant Monday that he won’t buckle under to demands that he permit Canadian businesses to continue to deduct interest charges on foreign investments in both Canada and abroad through the use of any low-tax third country, or tax haven. They will be allowed the deduction in just one jurisdiction.”

The good news is that Canadian companies operating in foreign markets and specifically Barbados have been given five years to stop the practice commonly known as “double dipping”. Of course Senator Eastmond and her government will take comfort in the fact that five years is a long time in politics and policies can change if a another person were to take up the office of finance minister in Canada. Although Barbadians must be grateful for the grace period, it provides little comfort in the shadow of what the OECD attempted to do to small offshore jurisdictions like Barbados a couple years ago.

BU derives little comfort in highlighting the fickle nature of the offshore sector and how with the stroke of a pen the sector in domiciles like Barbados can be decimated. Mia Mottley last year touted the news that Barbados had signed tax treaties with India and the Netherlands but our best investigation has not indicated any significant activity originating from the two jurisdictions that would fill the void left if Canadian companies were to leave in mass. Senator Eastmond may respond that although the “double dipping” is a very attractive incentive there are other benefits that should encourage Canadian companies to set-up or to remain in Barbados. At BU we prefer to operate using worst case scenario planning, that way Barbados operates from a win-win position. It is a strategy that the Barbados CWC 2007 organizers should have adopted when we consider how the exit of India and Pakistan struck the organizers for six.

It is not our intention to paint a picture of doom and gloom but unfortunately we have to call it like we see it. So often in our small island we have given lip service to the Singaporean model of development, but lack the commitment to implement similar policies which have worked for the Singaporeans. For example, in Singapore it is mandatory that as a prerequisite for any IBC establishing operations the local cadre of management must be trained by the expatriates in the first 2-3 years of start-up. So that long before the tax holidays expire the companies can easily continue to operate with local management. In Barbados it appears that IBCs are given generous tax benefits but appear not to be obligated to transfer skills to local management. Under this arrangement many of the companies leave when tax holiday expire and leave a shell behind with workers scrambling to re-establish themselves in the market. We are also concerned that when BU attempted to solicit information from the BIDC and the Ministry of Commerce about the criteria around how IBCs have been given tax holidays, we were told it is private business. Why should this information be kept private? After all a tax holiday using the principle of opportunity cost represents lost of revenue to the tax payers of Barbados.

Perhaps Senator Eastmond who has shown the inclination to respond to comments on the blogs can enlightened the BU readership.