Barbados Budget 2019 – EY Tax Alert

Download the full budget commentary here.

By Ernst & Young

March 22, 2019

Barbados Budget 2019

Yesterday, the Prime Minister and Minister of Finance, Mia Amor Mottley, delivered a Budget Speech characterized by honesty, passion and transparency. What is more, she made it clear that Barbados is committed to a journey of transformation that leaves little room to maneuver.

Close analysis of her presentation clearly shows that this Administration has made two big bets to put Barbados on a path to growth. The first is to preserve our international business sector, and the second is to make our tourism sector a stronger contributor to our economic recovery.

At the same time, the Prime Minister made it clear that the island’s growth strategy is “citizen-centric”. In stating that, the Prime Minister stressed that Barbados would be a participatory democracy. “Barbadians will not just have a piece of the rock, but a piece of the action,” she said.

The Government demonstrated its steadfast commitment to the OECD requirements by removing withholding taxes on interest, royalties and management fees for every investor, foreign and local. Along with these measures, certain anti-abuse provisions were announced.

In addition, the Prime Minister has reiterated her Government’s commitment to making it easier to do business in Barbados. For example, the management of the Corporate Affairs and Intellectual Property Of ce (CAIPO) will be outsourced to a professional team to guarantee efficiency and timeliness in registering businesses. Also, she announced dramatic changes to the Town and Country Planning Act to prevent repeated refusals to granting town planning permits. Just as welcome is the news of the gradual liberalization of exchange controls.

To add an even greater sense of assurance and transparency to foreign investors, the Prime Minister has undertaken to limit the degree of discretion of the Minister of Finance in granting tax concessions and incentives. In this regard, a commission will be established to review the investment code and tax concessions. This is in line with international best practices.

For the tourism sector, the Prime Minister has made it clear that this industry will have to contribute more through increased taxes on accommodation. She presented innovative opportunities that the industry could use to enhance its offering. For example, she suggested that the industry increase its medical tourism offerings to include therapies, rehabilitation and treatment services involving medical marijuana.

The Prime Minister also suggested that the industry could grow by encouraging private member gaming establishments (i.e. casinos) primarily linked to high-end mega investments. We interpret this to include establishments such as hotels with casinos.

In her presentation, the Prime Minister stressed, with considerable passion, her Government’s commitment to social justice and the equitable sharing of the burden involved in transforming Barbados. Recognising the heavy burden of taxation placed on the middle class, she promised corrective action by reducing statutory income tax rates, more in line with regional standards.

The Prime Minister broadened the base for VAT, but compensated taxpayers by extending the availability of the reverse tax credit and effectively exempting persons from tax on income between $25,000 and $35,000. However, this may not be sufficient to counteract the financial burden of increased bus fares.

She also listed a number of transformative initiatives that her Government plans to take. For example, seven departments have been earmarked to start the digitization of the Government. This is in response to the public outcry for improved services.

Additionally, by June 2019, Barbadians will be able to pay their taxes online. An even more welcome improvement will be the ability to pay tickets and fines for certain traffic offenses online. The Government also intends for Barbadians to renew drivers’ licences and passports online.

To provide Barbadians with investment opportunities for their $9 billion in savings, the Prime Minister promised to open paths for investment. For example, a regime for Green Energy Bonds will be introduced; legislation to permit National Unit Trusts will be created and avenues will be established to permit investing in Government projects such as the Hilton and Sam Lord’s hotels.

The Prime Minister also noted the need for investment funds centred on small investors. For example, she mentioned the upcoming introduction of an innovative growth market for small start-up companies.

In summary, in a difficult environment and with limited choices, the Prime Minister has remained steadfast to the path she articulated nine months ago. She has painted a vision of what she would like Barbados to be by 2025. At the same time, she pulled no punches about how difficult it will be to make this happen. To quote her, “We cannot recover a lost decade in a few years, but we can do so in seven”.

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