Barbados is filing a lawsuit against the introduction of a global minimum corporate tax rate that would cause the island to nearly triple its current rate and lose its status as a low-tax country.
However, Secretary of State for International Economics Ronald Toppin, who has suggested the move is another case of richer nations moving the goal post, says the country will need support from other low-tax countries, including those in the Caribbean, if it has a chance to succeed in its struggle.
“We expect a kind of unity in it. Barbados cannot push this back and achieve something on its own, so a serious awareness must be raised in states with similar positions so that we can all speak about it with one voice, ”he said at the House of Representatives meeting on Tuesday morning when he addressed the Companies (Economic Substance ) (Amendment) Bill 2021 introduced, which should clarify that partnerships belong to those companies that have to carry out their core business, income-generating activities in Barbados in order to benefit from the lower tax rate here.
Barbados’ corporate tax rate is currently 5.5 percent. However, finance chiefs of the group of the 7 richest democratic countries (G7) agreed earlier this month to support a new global minimum rate of at least 15 percent that companies would have to pay regardless of their headquarters.
Toppin told Parliament that local authorities were not surprised by the announcement and were already working on a strategic response.
“We have known this for some time, and it has caught the attention of the top economic, financial and tax figures in this country, as well as those stationed overseas who are all involved in dealing with this issue in order to grow the best answer as we can, ”he said.
“This is one of those cases where power unfortunately tends to be right, and where small states end up being thrown around, because this proposal is one of the greatest contradictions there could ever be. When countries like Barbados became low-tax countries, they precisely said, “That’s fine, you can be a low-tax country, but to get that status we leave you alone when you legislate on economic substances”. The economic substance legislation was their creation. It’s you who said that!
“The argument we are going to use – which we have already begun to use – to push this back is exactly what I just said: that you told us to get rid of economic substance [legislation]… in implementing this global minimum tax rate you have to acknowledge that to a certain extent, you have to acknowledge what we call an economic depletion, you have to give us a certain amount of credit, ”Toppin emphasized.
The international economy minister said that Barbados’ position had been recognized to some extent so far.
“They seem to throw something and say, ‘Yes, we can see that, we’ll look at it. You take a look at it, but what it will end up being is everyone’s guess at this point, ”he said.
According to Toppin, as things stand, it would not be beneficial for low-tax countries to insist on their current rate unless they were given some leeway by the G7 countries.
“The current position seems to be this: If you choose, ‘I’ll stick with my 5.5 percent’ and charge an institution here 5.5 percent, in their country of citizenship or where they’re from, they will have to pay the difference, so it will definitely pay 15 percent. So if you ask less, you won’t earn anything, ”he said. “You now have to face the arduous task of differentiating yourself from other jurisdictions, all of which have to charge 15 percent.”
However, said Minister Toppin, nothing has been finalized. He said more details are expected by the end of July.
At the same time, he stressed the importance of unity among low-tax countries, as “this may or may not be a blacklisted issue”.
“I don’t think there would be such problems yet, but in the past I have to say that speaking about these things with a regional voice has not been very successful,” said Toppin. noting that such harmony was lacking in 2018 when Barbados and others were threatened with a blacklist.
“If you’re on the blacklist, you have no friends. You have a number of vultures flying around waiting to see when [you’re] dead to come down and throw you and devour your flesh. Even some people in your own jurisdiction coming with you all the time – in the form of some service providers – working with you all the time; They know your standards, they know your commitment to integrity, they know all of this, but just one pronunciation of the word blacklisting changes their perception of you, ”he added.
“You have no friends when you are blacklisted; you feel very alone. So, thank God that right now the Ministry of International Economy Barbados is not on any blacklist; none at all. “(DP)