Government ready to counter global corporate tax diktats

by Marlon Madden

All is not lost as Barbados prepares for the implementation of a single minimum overall corporate tax rate of 15%.

This assurance from Avinash Persaud, eminent economist and special envoy to Prime Minister Mia Mottley, who indicated that Barbados had several options to ensure that international business companies do not migrate due to the new tax regime.

According to the Organization for Economic Co-operation and Development (OECD), the two-pillar tax plan is designed to “reform international tax rules and ensure that multinational companies pay a fair share of tax wherever they operate.”

The OECD said in the first pillar that it aims to achieve a “more equitable distribution of profits and taxing rights among countries with regard to the largest multinational companies, including digital companies”.

In the second pillar, it aims to establish a floor, or a rate below which countries will not set their corporate tax rates. This will be done through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases.

Stressing that Barbados was not caught off guard, Persaud assured the government foresaw the new rule by crafting policy responses.

Insisting that Barbados was “not in a bad position” because of the current tax regime, he explained that the increase in taxes that businesses would pay would result in more revenue for the government, which could then be increased. used to keep those same businesses by offering grants.

Stating that this was only an option, Persaud said “our approach is to see how we can make it work”.

He was recently addressing an online forum – A Dialogue on the Global Minimum Tax Rate and Barbados – which was facilitated by the Barbados International Business Association (BIBA) and Invest Barbados.

“First of all, inside the tent, we’re going to argue and agitate for a substance-based exclusion. This is what we have spent the last decade developing, ”said Persaud.

Stating that local authorities have been looking closely at “several Plan B’s,” Persaud said there was no clear option yet given the need for consultation and discussion, discussions have already taken place with the OECD and other stakeholders.

However, he revealed that one option was to offer grants to companies that spend on research and development in Barbados, to encourage them to stay.

“I think today the world is competing for subsidies, rich countries are competing for subsidies. . .

We haven’t played this game before because we didn’t have the income for it, but the 1-15% tax rate could very well provide us with the resources that will allow us to offer the grants that we need. make them competitive.

It would be part of Plan B if we can’t win a broader substantive exclusion, ”he explained.

Barbados currently has a corporate tax rate of between 1 percent and 5.5 percent, based on income taxable on a sliding scale.

Describing the proposed 15% global minimum tax rate as a “saga,” Persaud said there have been “more twists and turns than Games of Thrones” when it comes to global tax matters over the years.

He said there was “no reason to be in opposition” to the new tax rate, explaining that “we have all seen if it is with these lists that they put us on, that being outside poses a lot of problems [and] that people don’t want to be in our jurisdiction if we’re on a list as a non-cooperative member ”.

“So if things don’t go forward and we’re on the outside, we don’t win anything and we haven’t lost anything. If this goes ahead and we are seen to be on the outside, we will lose something – we will be seen and painted as being dragging and uncooperative jurisdiction and they will create problems for us.

“So we always thought we were going to go with the consensus,” said Persaud, as he sought to explain why Barbados had signed up to the new global tax plan.

He said Barbados would continue to “work within the camp to get a better system,” adding that although the main goal was a substance-based exclusion, there were other Plan B’s.

“We also look at plans B if the exclusion of the substance is not adequate or is removed. These B plans provide opportunities for that because we are getting to a point where, basically, we would be raising our taxes rather than reducing them.

“So we can think of some neutral or positive ways for revenue to stay very competitive,” said Persaud, who has chosen not to give details on the plans at this time. The implementation of the new tax plan is expected to take several months.

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