Barbados

Barbados: 'Tough taxation stance necessary'


By added on 06/12/2013

Agreements such as the FATCA (Foreign Account Tax Compliance Act) used by countries like the United States of America and the United Kingdom to “pressure” other countries into establishing tax standards may be justified … at least according to tax specialist and management consultant James Henry, reports the Barbados Advocate.

One of the panelists at a recently held discussion for trust and estate practitioners, called “Tax Planning: The new moral sin”, Henry admitted that the methods used to arrive at these tax standards could be viewed as “neocolonial” in nature, but were needed if countries were to reach at some point of agreement to root out tax evasion practices which are at the root of many of the fiscal calamities facing several economies.

Responding to comments made by another panelist, Professor Avinash Persaud, who suggested that the source of America's fiscal deficit was tax cut initiatives made under the Regan and Bush Jr. Administrations, as well as the wars in Iraq and Afghanistan, and not because of the fact that US multinationals were “hiding” money in tax havens, Henry argued that international financial centres such as Barbados and the Cayman Islands could not totally detach themselves from being part of the problem.

Questioning if it was a deflection to put the burden on such centres, Henry, a member of the New York Bar, suggested that these centres “started” the debate by rapid increases in the number of international business companies (IBCs) which moved some of their operations – real or virtual – to these countries. Henry posited that in 1994, Barbados had 3 000 IBCs and by 1999, that figure had increased to 7 000. Coming under fire from other panelists and members of the audience for his comments, Henry insinuated that due to the fact that 70 per cent of the country's banking assets were owned by Canadian banks, it was not surprising that they had “a little bit of influence on what happens here”.

However, according to Persaud, Barbados was doing no different from other jurisdictions which were legally operating in a manner that enabled them to compete for international business. He added that it was Barbados' sovereign right to be able to determine how it structured its taxes and that it was not only wrong, but hypocritical for the USA and the UK to infringe upon that right.

Said Persaud: “London is a global financial centre. Why?... Taxes! The non-taxation of euro bond brought finance from New York to London. London is a global centre of hedge funds why? Taxes... the way they tax hedge funds in the UK was designed to change behaviour and bring businesses, so they are able to do that, but we must not! We do not have the sovereignty to choose our taxes!”

Persaud argued that Barbados did not support tax evasion and that the country had a long history of treaty arrangements of transparency and of exchange of information.

Meanwhile, Attorney General Adriel Brathwaite noted that the Government of Barbados had no intention of blackmailing any corporation into paying a greater amount of taxes.

“If there are opportunities within our laws that could be used legitimately by taxpayers – corporate or individual – to minimise their taxes and we have a problem with it, then we should address it legislatively. We should not do like what happened with Starbucks and blackmail the company into agreeing to pay a specific amount in taxes … blackmail should not be if you have the legislative apparatus to address it,” the minister maintained. Brathwaite added that though the Government is interested in collecting as much revenue as possible, that interest did not mean it had to right to attack CIBC FirstCaribbean International Bank, Bank of Nova Scotia, or any of the other multinational corporations into paying more taxes despite the fact that they were following the rules.