Owen, Christopher: Offshore Survey – January 2003

Offshore Survey – January 2003 by Christopher Owen

The Barbados Government is to reduce corporation taxes from 37.5% to 25% by the year 2006 in order to accelerate convergence between the tax rates for onshore and offshore business. International businesses are currently taxed at up to a maximum of 2.5% on profits.

Prime Minister and Minister of Finance & Economic Affairs Owen Arthur said in the Budget statement on 22 October that the differential had attracted the attentions of the OECD and the US Treasury, caused concern among some existing tax treaty partners and stood in the way of some countries entering into tax treaties.

It had been anticipated that removal from the OECD’s tax haven list would lead to renewed growth in international business and the financial sector, but Barbados now faced a new challenge in the form of the initiative by the US Treasury to deal with corporate inversion. This had resulted in legislative initiatives and raised concerns about the use of the US/Barbados tax treaty.

The next major step for Barbados, he said, was to reform its corporate tax system to establish a common rate, which was sufficiently competitive to allow it to keep and expand international business, and meet the concerns of treaty partners.

International competitors, such as Ireland, had set a relatively low tax rate (12%) applicable to all types of business. Arthur therefore proposed to reduce corporation tax from 37.5% to 36% for income year 2003 and to accelerate the current proposed reduction from 33% to 25% by 2006.

Barbados has seen an improvement in the performance of the international business sector this year, in particular strong growth in the registration of international trusts and international insurance companies. The Programme for the Accelerated Growth of the International Business Sector, introduced last year in response to 11 September, had clearly contributed to the improved results. It would be continued with emphasis in these areas.

Cayman Islands sets out new financial sector initiatives and objectives

Financial Secretary George McCarthy set out the government’s proposals for the financial sector in his Budget address to the Legislative Assembly on 8 November.

During the current session of parliament, it plans to introduce laws to establish the Cayman Islands Shipping Registry as a statutory authority, and to implement various international shipping conventions, as well as updates to various financial services laws to ‘encourage appropriate market behaviour’.

The principal policy objectives set out in the address are to:

Barbados to lower corporation taxes