EDITORIAL: Extending the treaty network
THE DEVELOPMENT of this island as an international financial centre has been in the news earlier this week with the signing of the anti double taxation treaty with the Republic of Panama. It is a significant addition to the island’s several treaties aimed at extending the usefulness of the island as an international financial centre and is likely to bring a new swathe of potential business opportunities to the island from the countries of South America.The treaty will stop businesses from being taxed twice in respect of business done in either of the two countries by companies or taxable entities engaged in business. Teachers and professors and sportsmen will also benefit from this treaty when they move between the two countries on business.The importance of these treaties is that they support the regime of tax incentives, which acts an inducement to capital intensive operations to establish their companies here thereby providing employment and foreign exchange among other benefits for the island service providers.It has turned out to be truly prescient that from the inception of its enabling legislation, the then Government of Barbados in 1976 decided to establish a low tax regime supported by a treaty network, at a time when some were urging the no tax regime similar to the Bahamas and the Cayman islands and others were dead set against the idea altogether!In 2001 as we recall, the Organisation for Economic Co-operation and Development (OECD) was challenged with Barbados leading the fight when it sought to blacklist a number of the developing countries who had been offering tax incentives to high net worth individuals and corporations. That we were able to save our financial centre was due in large measure to the advanced approach and initial steps which had been taken at the very inception, to ensure that we did not develop a tax haven industry but a financial centre with transparency and developed regulatory controls. It is the maintenance of that initial goal of transparency in particular, that has fuelled the signing of this treaty with Panama. Indeed as Minister of International Business George Hutson remarked at the signing, “In the context of the financial climate, the treaty sends a clear message of the two states’ endorsement of the international standard of transparency and tax information exchange”.We support the current Government’s efforts to continue development of this sector as part of the continuum of its national responsibilities, because the provision and development of services has proved to be a lifesaver to our economy with the international companies yielding some 60 per cent of our corporate taxes.In the meantime one wonders what has become of the proposal announced in 2007, by the current Leader of the Opposition who was then minister of Economic Affairs that the London Court of Arbitration was looking to open up its first ever regional office here.We certainly hope that this idea has not died, because opening such a centre here would add immense prestige to our country’s image as a business centre. Many international companies opt for arbitration for the resolution of disputes and there is certainly room for growth in that arena which would be a useful adjunct to our international business and tourism efforts.The continued growth of the sector requires an increase of homegrown talent proficient in international tax law, and particular in the area of tax treaties. Such skills are in high demand on the international markets, and efforts will have to be made to keep talented Barbadians at home once they have qualified. That international tax law is now being offered as one of the areas for national development scholarships is a step in the right direction, and justifies our earlier call for such an initiative.Our island has developed the sector as a useful foreign exchange earner and a provider of high class employment; but constant extension of the treaty network is required to enhance its growth and use.