Big gift for busi­nesses

UK Barbados Nation - - NEWS - By SHAWN CUM­BER­BATCH shawn­cum­ber­[email protected]­tion­

A MAS­SIVE COR­PO­RATE TAX EASE is com­ing for Bar­ba­dian com­pa­nies.

After rais­ing the stan­dard cor­po­ra­tion tax rate from 25 to 30 per cent ef­fec­tive last month to gen­er­ate an ad­di­tional $57 mil­lion in tax rev­enue, Gov­ern­ment has changed course as it moves to dis­man­tle a 40-year tax regime by next month to avoid “se­vere” in­ter­na­tional sanc­tions.

It means that the ma­jor­ity of com­pa­nies will now pay be­tween one per cent and 5.5 per cent on tax­able in­come, and Prime Min­is­ter Mia Amor Mot­t­ley is urg­ing these en­ti­ties to pass on some of the ben­e­fits.

She said Gov­ern­ment’s rev­enue would not be im­pacted by the new sched­ule of taxes. In its re­cent third quar­ter re­view, the Cen­tral Bank said Gov­ern­ment earned $159.6 mil­lion in cor­po­rate taxes be­tween April and Septem­ber.

Un­der the new regime, in­ter­na­tional busi­ness com­pa­nies and do­mes­tic en­ti­ties would pay the same tax rates, but Mot­t­ley said Bar­ba­dos would “re­main among the most com­pet­i­tive of those coun­tries that levy taxes”.

The Prime Min­is­ter an­nounced the ma­jor tax pol­icy change in a Min­is­te­rial State­ment in the House of Assem­bly on No­vem­ber 20. Min­is­ter of In­ter­na­tional Busi­ness Ron­ald Top­pin an­nounced sev­eral re­lated leg­isla­tive changes two weeks ago.

Mot­t­ley said Gov­ern­ment was forced to act after the last ad­min­is­tra­tion, “in the dead of night”, made com­mit­ments to the Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment (OECD) to re­move any dis­tinc­tion be­tween do­mes­tic and in­ter­na­tional taxes by De­cem­ber 31.

“This left us just a few months to change over a tax sys­tem that has been de­vel­oped over 40 years, mid-air, while we were at the same time re­struc­tur­ing our econ­omy . . . .

This was an­other act that threat­ened to weaken the Bar­ba­dos econ­omy . . . but we will turn this into an op­por­tu­nity.

“This Gov­ern­ment is not one for hid­ing from dif­fi­cult de­ci­sions or avoid­ing dif­fi­cult de­ci­sions. We must play the hand that we were dealt.”

While do­mes­tic com­pa­nies now pay a cor­po­rate in­come tax rate of 30 per cent, reg­is­tered small busi­nesses and man­u­fac­tur­ers, and ap­proved de­vel­op­ers in spe­cial de­vel­op­ment ar­eas, pay a

15 per cent rate. In­ter­na­tional busi­ness com­pa­nies, in­ter­na­tional banks and in­ter­na­tional so­ci­eties with re­stricted li­a­bil­ity now pay cor­po­rate tax rates of be­tween 0.25 per cent and 2.5 per cent, while cap­tive in­sur­ance com­pa­nies are tax ex­empt.

Re­gard­ing the new cor­po­ra­tion tax rates, the Prime Min­is­ter said “all en­ti­ties (ex­clud­ing in­tel­lec­tual prop­erty en­ti­ties) li­censed be­fore Oc­to­ber 17, 2017, will be grand­fa­thered (ex­empted) and in this way all of the ben­e­fits en­joyed by these en­ti­ties will re­main.

“The tax rate ap­pli­ca­ble to these en­ti­ties for tax­able in­come in ex­cess of $30 mil­lion will, how­ever, now be one per cent, in line with the min­i­mum rate I will now an­nounce on con­ver­gence,” she added.

The Min­is­ter of Fi­nance said all other cor­po­rate en­ti­ties not ben­e­fit­ing from ex­emp­tions would be taxed on the fol­low­ing slid­ing scale: up to $1 mil­lion of tax­able in­come – 5.5 per cent; be­tween $1 mil­lion and $20 mil­lion of tax­able in­come – three per cent;

be­tween $20 mil­lion and $30 mil­lion of tax­able in­come – 2.50 per cent; and

over $30 mil­lion of tax­able in­come – one per cent. The three classes of li­cences to be cre­ated un­der the amended In­sur­ance Act, would have tax rates rang­ing from zero to two per cent. Also, tax losses avail­able for off­set in an in­come year would be re­stricted to 50 per cent of tax­able in­come.

“With these new tax rates, I lay down a chal­lenge to do­mes­tic com­pa­nies that there must be ben­e­fits to the coun­try of sharply lower cor­po­ra­tion tax rates. Bar­ba­di­ans will ex­pect these ben­e­fits be in the form of higher lo­cal in­vest­ment, more en­fran­chise­ment of em­ploy­ees and bet­ter pay,” Mot­t­ley said.

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