Barbados And The New Regulatory Standards

Indeed, the current century and, more particularly, the past 25 years have therefore coalesced with a burgeoning and ongoing international regulatory struggle between the financially powerful and those seeking to be empowered with some of the private wealth of the powerful. It has ebbed and flowed with constant multilateral discussion and debate, negotiation and narration, as well as promises and publications. Barbados has been at the core of this global financial battle and at one point, around the year 2000, took on actual leadership when the strictures were canonised within the rubric of "Harmful Tax Practices".

The Base Erosion and Project Shifting (BEPS) has emerged as a continuing but more poignant attack on the outer circle of jurisdictions including Barbados. For the first time, the OECD, the G 20 group of countries, and non- OECD member countries combined to, in their minds, fight tax competition, tax evasion and general abuse of tax rules. With over 12 action plans, the OECD as leader sought to build a new platform for intra-jurisdictional interaction in subject areas such as: the new digital economy; harmful tax practices; transfer pricing, and its related documentation with country by country reporting; a multilateral instrument to implement BEPS; the limiting of base erosion from interest deductions and other financial payments; the prevention of misuse of the "Permanent Establishment" status within treaties; modalities of analysis of BEPS data and the necessary action; the disclosure of aggressive tax planning schemes; and dispute resolution which is effective.

These elements have now coalesced and combined into the recent Economic Substance requirements which have taken on a life of their own and sought to impose on Barbados and other international financial centres a new standard for living as opposed to a new standard of living. The response from Barbados has been a strident effort to meet this new regulatory pressure and, like many of the other international financial centres, Barbados has heralded the introduction of new economic substance legislation as a positive new feature of its legislative architecture.

Barbados, indeed, may however be well placed to take advantage of the new substance requirements as a result of its historical double tax jurisdictional status. For the associated "mind and management" and / or "central management and control" concepts - depending on the treaty and jurisdictional origin - were often not followed, since they were not prescribed by statute and assumed substance and relevance from case law. Indeed, the Barbados shelf company had never taken on a jurisdictional life of vigour and it gradually continued to languish towards its virtual demise. The new economic substance legislation calling for actual presence in Barbados as a marker of business legitimacy and substance will therefore buttress the presence already practised - albeit sometimes loosely - by many of the country's existing international business entities.

The celebrated author Ralph Waldo Emerson (1803 - 1882) in his Essays: First Series: Friendship speaking on cooperation and collaboration among friends noted that: "Two may talk and one may hear, but three cannot take in a conversation of the most sincere and searching sort". The current conversation between the European Union with all others is, indeed, part of a much more expansive conversation involving the global village and its international financial linkages through international commerce and more generally internationally mobile capital. Barbados unavoidably remains part of that conversation, albeit a small part. The current conversation, however, unlike Emerson's dictum is a searching one among many actors - and Barbados hopes for respectful acknowledgment of its voice.

Sir Trevor Carmichael KC
Sir Trevor Carmichael, KA,LVO,KC. was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica. After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados Chapter of the International Fiscal Association of which he is Charter President. He is the Barbados Country Chairman of the International Litigation Committee on Business Law of the International Bar Association and a former Deputy Secretary General of the International Bar Association. He is a Life Fellow of the Institute for Advanced Legal Studies in the United Kingdom, a Life Member of the Commonwealth Magistrates and Judges Association and a member of the International Law Association.