The world within which international financial centres (IFCs) operate continues to tilt on its axis. The combined effects of the global economic downturn, challenges to IFCs’ tax regimes by the Organisation for Economic Cooperation and Development (OECD), the negotiation of Tax Information Exchange Agreements ( TIEAs) and advances in telecommunications capability have drastically changed the way IFCs do business.
Barbados has not been immune to the changing tide. It has effectively adjusted to the currents impacting investment inflows, and while its domestic economy averaged marginal growth between 2007 and 2011, total registrations of licensed international business companies grew by 7%.
Foreign direct investment (FDI) – a key catalyst for sustained social and economic development for decades now – remains one of the main pillars of the Barbadian economy. The international business sector is estimated to pump approximately BB$900 million into the economy annually. It provides capital inflows, employment, knowledge and technical expertise, foreign exchange and government revenues. These tangible benefits assist with the country’s holistic development, helping to fund social, educational, health care and infrastructural programmes. Understandably therefore, government’s response to ensuring that Barbados enhances its global competitive positioning has been proactive, balanced and responsible.
Central to this strategy is government’s vision of transitioning Barbados to a “fully developed and peoplecentred society”. This has meant that successive governments have spared no effort in employing best practice as a means of positioning the country as a preferred offshore location. Today, government policy on international business continues to focus on improving industry standards and nurturing a culture of excellence, particularly with respect to business facilitation.
A primary part of its efforts to do so has been the management of the country’s regulatory systems in line with OECD mandates. ‘White listed’ by the OECD since April 2009, Barbados is committed to updating its legislative framework in order to complete future Peer Review phases, while providing international investors with the peace of mind that it is a reputable, well-regulated and transparent financial centre. In view of this, protocols updating exchange of information provisions were recently signed with Canada, Finland, Norway, Sweden, and the United Kingdom, while TIEAs have been signed with Denmark, Greenland and the Faroe Islands. Looking ahead, the ability to exchange information with source countries will continue to be a priority.
Besides a prudent regulatory framework, much of Barbados’ competitive advantage and attractiveness as a jurisdiction for international business flows from the additional benefits provided in its network of tax treaties. The nation continues therefore to negotiate agreements with countries strategic to the international business community, making sure that via Barbados, investors have financially beneficial access to the world’s leading and emerging economies.
Since 2008, tax treaties have been signed with the Czech Republic, Ghana, Iceland, Luxembourg, Mexico, Panama, Portugal and Spain, while those initialled with Bahrain, Belgium, Italy, Singapore and Vietnam are presently awaiting signature. Other treaty negotiations are being actively pursued with countries in Africa, Asia, Latin America and Europe. Opportunities for business in these regions are on the rise and Barbados is already attracting investment from the Latin American market, in particular. As Barbados increases and refines its promotional thrusts, traditionally strong markets such as Britain, Canada, and the United States will also remain in focus.
Maintaining a current, innovative and relevant product mix is of paramount importance to Barbados’ ongoing success as a preferred domicile. Several initiatives announced in the 2012 Financial Statement and Budgetary Proposals are aimed at achieving this, namely:
The lowering of the tax rate on the highest band for taxable corporate income for International Business Companies, Societies with Restricted Liability and Offshore banks. This moved from 1% on all profits and gains in excess of BB$30,000,000 to 0.5% and 0.25% for tax years 2012 and 2013 respectively. The range of services eligible for the Foreign Currency Earnings Credit has been expanded to include exploration, extraction and other mining, oil and gas activities, licensing and sub-licensing of intellectual property and shipping services.
A special International Business legislation day focussed on passing key pieces of legislation to give life to important amendments and new products, including Private Trust Companies, Foundations and Investment Fund legislation.
A special entry permit regime for High Net Worth Individuals looking to become tax resident but not domiciled in Barbados, coupled with low taxes on foreign sourced income.
Excellence in customer service delivery is pivotal to Barbados’ success in attracting and welcoming FDI to its shores. Appreciative of the fact that settling into a new jurisdiction can be challenging, government makes the transition easier by providing personalised services to international clients through its business development agency, Invest Barbados (IB). IB has offices located in New York, Toronto, London and Bridgetown. The IB team of professionals, working in collaboration with the relevant public and private sector stakeholders, guide foreign investors through the processes of exploration and evaluation of Barbados’ value proposition, to establishment and expansion of profitable enterprises.
Integral to the effective delivery of excellent customer service, is the International Business Customer Charter. This Charter is presently being reviewed to ensure that Barbados’ service levels compare favourably with best practice, and are consistent with brand promises.
The recent waves of change have reinforced the importance of FDI to sustainable development in Barbados, as well as to the social and economic well-being of its citizens. Government therefore recognises that international business is essential to the economy’s lifeblood. Woven into the DNA of the Barbados development model, its positive ‘spillovers’ cascade into all economic sectors.
As the future of sustainable development pivots increasingly toward global competitiveness and interconnectivity, Barbados will keep pace with emerging telecoms service offerings. Barbados is committed to being more agile, flexible and responsive to the needs of investors. Government will continue to provide a competitive, business friendly environment, a strong regulatory framework, an enabling treaty network, and a cadre of qualified professionals – all supported by an enviable quality of life.