THE ISSUE: Long and fruitful relationship
Barbados’ international business plus financial services equal Canada.
There are some who would call that statement erroneous. Others would deem it a gross exaggeration.
But when you consider that outside of tourism the sector is the island’s main breadwinner, and ponder on Statistics Canada data showing that up to the end of last year Canada’s direct investment here was worth CAN$59.3 billion (BDS$110.3 billion), such a view might not seem outrageous.
Canada’s national statistical agency concluded that Canadian investment in Barbados continues to grow despite challenges, including increased competition, and some negative publicity and opposition in the North American country.
It is estimated that its investment in Barbados was $58.7 billion (BDS$109.8 billion) in 2011, $49.9 billion in 2010, and $53.2 billion (BDS$93.3 billion) in 2009, $47.2 billion (BDS$88.3 billion) in 2008, and $33.4 billion (BDS$62.4 billion) in 2007. The United States and Britain are the only two countries attracting more Canadian funds.
In a recent analysis on Uses, Benefits And Competitive Advantages Of Barbados As A Jurisdiction For Canadian Investors, PricewaterhouseCoopers Barbados officials Gloria Eduardo and Alexander Johnstone concluded that “despite the emergence of other jurisdictions who have signed Tax Information Exchange Agreements with Canada being able to enjoy similar benefits, Barbados continues to strive to be the jurisdiction of choice for international investors”.
“A key advantage that Barbados retains is its extensive and ever growing double taxation treaty network, which provides opportunities for international structures and the numerous tax and tax administration benefits that these treaties provide,” they noted.
Other advantages identified included the fact that Barbados’ company laws were closely modelled on Canadian legislation, thereby making it easy for Canadian lawyers to understand and apply, that International Business Companies Act permits an international business company to keep its books and records in most foreign currencies, and because corporation migration into and out of Barbados with minimal transaction costs and tax consequences is permitted.
Important entities like Invest Barbados and the Barbados International Business Association (BIBA) have also emphasized the important role Canadian companies, which have investments in areas including inter-company financing, holding of investments, holding of intellectual property, mining operations, trading in various items, captive insurance and international banking, play in Barbados.
So much so that in 2010 BIBA opened a chapter association in Canada, while Invest Barbados regularly holds conferences and other meetings with investors in major cities there.
The importance of the relationship has also not been lost on the governments of the two countries. There is a long history between Canada and Barbados, including trade relations, which date back to 1907, when the Canadian Trade Commissioner Service opened an office here.
Additionally, a newly independent Barbados formally established diplomatic relations with Canada as soon as it was no longer a British colony in 1966.
An updated Barbados fact sheet issued late last month by the Canadian government acknowledged the importance of the relationship including in trade and pointed out that “discussions are under way between Canada and the Caribbean Community (CARICOM), which Barbados is a member of, aimed at achieving a mutually beneficial trade agreement that provides significant economic benefits and takes into account the region’s capacity constraints and vulnerabilities”.
Current Minister of International Business Donville Inniss, like all of his predecessors, has also voiced the importance of the Canadian relationship, not least because of the investment in the international business and financial services sector.
In recent times, however, the job of sustaining such investments has been challenged as there have been some rumblings from some individuals and groups in Canada, including parliamentarians who believe Canadian companies, aided and abetted by Barbados, are using loopholes to avoid paying their full share of taxes back home.
Since Canada is so important to Barbados’ livelihood, issues like these have to be carefully monitored and responded to.
“I am aware of the persistent and often times unwarranted attacks on Barbados as a domicile of choice for global entrepreneurs. We will continue to communicate with all relevant parties on these matters as we seek to ensure that we do not facilitate tax evasion but rather play our role in helping legitimate investors expand their global reach,” Inniss said in May.
“The Government of Barbados has already dispatched correspondence to the Canadian government on relevant matters and we will intensify our discussions over the next weeks.”
Subsequently, on June 13, 2013, in a Barbados Government Information Service report on a meeting he held with Canada’s Minister of State in the Ministry of Finance Ted Menzies, the Barbados official said the message he left there was that Barbados remained a transparent treaty-based jurisdiction for Canadians to invest in.
“We sought to convey that Barbados is by no means a tax haven and I think that is one message that we put out there very clearly. We also impressed upon them that we, as a country, are serious about business based on the fact that we have excellent treaties that work, and work well.
“We also emphasized that Barbados continues to be the preferred choice for Canadian investors seeking to have a true global reach, as we were able to showcase how using Barbadian structures have and will continue to benefit Canadian entities through their global expansion as well as through their domestic work,” he said.
Inniss expected that as a result of the trip Barbados would receive increased investment from Canada, especially from companies seeking to expand their business globally.