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FOR THE RECORD – No tax haven here

Ezra Alleyne

FOR THE RECORD – No tax haven here

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The current debate on the international business sector catches my paternal interest for reasons that have very little to do with raw politics.
Barbados has been branded by French President Nicolas Sarkozy as a tax haven, and all Barbadians must join as one to denounce this ascription to us of a label which has the potential to cause major damage in a sector which is so acutely market-sensitive, that mobility (the capacity to pack up and go) is often written into the legislation.
Barbados has always, from the very inception, insisted that it would not run a tax haven and it carved a niche for itself as a clean treaty-based jurisdiction with disclosures appropriate to a double taxation treaty.  
In 1975, during one of my then frequent manifesto discussions with Opposition Leader Tom Adams, we discussed the development of Barbados as an offshore centre.
He wondered why, given our developed infrastructure, we had not developed a thriving sector as The Bahamas, Bermuda and the Cayman Islands had done, given that the late Rt. Excellent Errol Barrow had enacted an International Business Companies Act since 1965 in terms identical with our competitors.
I argued that there was little point in an offshore company being established here when the expatriate senior officers working within those companies would be taxed at (higher) domestic rates of personal tax charged here, but would pay no personal tax at all, if they set up in our regional competitors.
Barbados was therefore offering less than was being offered by Bermuda, The Bahamas and Caymans. The lesson was clear. If we were to succeed we needed to respond to the market conditions to be competitive and also to create a niche for ourselves. Our double taxation treaty inherited on Independence would be our niche.
A manifesto commitment was made to develop a meaningful offshore centre. The Barbados Labour Party (BLP) won the 1976 election and by 1979 we had an Offshore Banking Act, and an amended International Business Companies Act, which charged a low tax rate of 2.5 per cent on corporate profits to trigger the operation of the treaty, and we gave a tax credit to the expatriate employees of these companies. Other enabling legislation soon followed – and whoosh, the sector took off.
Both political parties now appeared to be on the same bipartisan page but the Democratic Labour Party (DLP) severely criticized the legislation when it went before Parliament, claiming that money laundering, prostitution, corruption, the mafia and all sorts of evil would attend the introduction of the sector. Yet, that this has not happened is because both BLP and DLP when in office since 1976, have “run very clean ships”.
But an early important lesson learnt by the BLP policymakers was that the Government had to respond quickly to threats to the sector and to keep a keen eye on developments within the market. It was this notion that dictated the stern and penetrative approach of Owen Arthur to the Organization for Economic Cooperation and Development (OECD) threat in 2001.
He had established a Ministry of International Business and now kept his eye fixed on the ball, and most of all, he provided prime ministerial economic leadership when it was needed.
The current nonsensical imbroglio in which Sarkozy was able to identify Barbados as a tax haven has to be attributed to a less than sensitive appreciation of the nuances of the offshore market by the current ministry!
Barbados has double taxation treaties with close to 40 countries and these treaties include tax exchange information clauses. But there is a problem with the OECD and its allies.
Put simply, the current requirement for “a clean jurisdiction” is to sign 12 standalone, up-to-date tax information exchange agreements, and it matters not that we have updated our double taxation agreements and our laws to provide for greater exchange of information.
Our regional competitors who do not even have our double taxation treaty network have signed the required number of standalone agreements. We have not! We have been branded, they have not!
Why have we not signed? Did we drop the ball? Or have we been caught napping? Or has the ministry been advised by technocrats that we need not sign?
In so very sensitive a market, we may perhaps have allowed ourselves to be unjustly and damagingly branded.
Ezra Alleyne is an attorney-at-law and a former Deputy Speaker of the House of Assembly. Email [email protected]