BRIDGETOWN, Barbados, Feb 9, CMC – The Barbados government is moving to reform its indirect tax system and is seeking assistance from the International Monetary Fund (IMF) and the World Bank, the Director of Finance, Ian Carrington, has said.
Carrington said that the two Washington-based financial institutions are providing the island with technical assistance by looking at its indirect taxes relative to corporate taxes, so as to bring them back into balance.
He said that the IMF tax officials have been examining the various taxes, namely the valued added tax (VAT), income tax, stamp duty, and betting and gaming.
Carrington said that the officials were also having discussions with the acting Revenue Commissioner, the Comptroller of Customs, all of the revenue agencies, the private sector and the Small Business Association.
“The reason Barbados has to reform the system is because we have made changes to our corporate taxes, as a result of seeking to be compliant with the European Union and the OECD (Organisation for Economic Cooperation and Development). We have removed the ring fence between the international business companies and the domestic ones by reducing their corporate tax rate down to the maximum of five per cent.
“As a result, this creates the opportunity for individuals to corporatize, that is, set up themselves as a business to seek to pay a lower level of taxes by making themselves appear to be a business…,” he said.
Carrington said since Barbados has entered into a US$290 million programme with the IMF, the Mia Mottley government has had to make sure no deficiency in revenue was created.
“The result is to bring both the direct and the indirect taxes back into balance. Therefore, we are pressing ahead to reform the indirect tax system by the next financial year [which starts in April], and so the IMF tax team has to get back to Government with its suggestions before the end of this financial year.”
Carrington said in the case of the World Bank, the assistance to Barbados would be in helping to operationalize decisions at the policy level, so as to ensure that the systems and procedures were correct.