Barbados To Expand Double Taxation Network
Barbados’ financial-services sector is rated as the second-largest source of foreign exchange earnings, behind tourism, for which new markets are being sought outside of Canada.
On Thursday, central bank governor, Dr DeLisle Worrell, said the country has been losing business in its International Business and Financial Services Sector (IBFS), which Barbados aims to rebuild through a stronger network of double taxation treaty arrangements.
The country has 24 tax treaties to date.
Worrell said that new IFBS markets are being targeted outside of Canada, which currently provides most of the country’s business.
“We are looking at expanding, and have targeted markets in non-Canadian areas,” he said, naming Mexico and Panama, and noting that discussions have been initiated with both the public and private sectors in those jurisdictions, including dialogue surrounding treaty negotiations.
But discussions are also being pursued with the Government in Canada on Barbados’ intention to provide a quality home market for companies of Canadian origin, Worrell said.
“We offer sophisticated services at competitive prices,” said the central banker, adding that the product and service range was also being expanded with the training of analysts and lawyers.
International banking and financial houses have been drawn to Barbados as a result of its tax incentives, special exemptions, guarantees on future taxation, and available professional services.
Income tax is applied on a sliding scale of 2.5 per cent to 0.25 per cent.
The Offshore Banking Act provides that dividends, royalties, interest, foreign securities funds, gains and assets generated or managed by a licensee are automatically exempt from the provisions of the Exchange Control Act.
The sector offers no direct tax or capital gains, no withholding tax on interest, dividends, royalties or fees, no exchange control on foreign currencies, future guarantees on tax rates and exemptions, income tax concessions for employees that qualify, and privacy protection via provisions for strong confidentiality.
While current data could not be found on the island’s offshore market, during fiscal year 2010/11 the sector contributed approximately Bds$186 million in corporate taxes, accounting for almost 60 per cent of the total corporate tax intake.
There are an estimated 45 offshore banks, and 3,065 international business companies registered.
Overall, the Central Bank of Barbados said on Thursday that economic growth is expected to accelerate slowly from less than one per cent in 2014 to approximately 1.6 per cent in 2015, and between two and three per cent thereafter.
Strategies for the growth of main foreign exchange earner, tourism, include marketing of sports and culture, and the government, Worrell said, is pursuing a new diaspora market through entertainment events and festivals.
The island is targeting the wealthy in Europe through activities that the rich enjoy, including yachting and golf, with several international tournaments planned for the calendar year.
Noting that growth has to be anchored in stability, Worrell said the central bank would continue to balance foreign exchange inflows and outflows to ensure that demand stays in the envelope that inflows allow.
The bank has been working on reducing spending power, he stated, so that demand for imports will contract.
The success of the strategy, Worrell said, could be seen in the recovery of foreign exchange reserves from 13 weeks at September 2013, to 15 weeks at the end of the December quarter, but he acknowledged that the reserves were boosted by some foreign borrowing.
Barbados raised US$150 million by private placement after a bond offer of US$250 million failed to tempt investors in London, New York, Boston, and Los Angeles.
Credit: The Cleaner