(BARBADOS TODAY) – Barbados’ reputation as a clean international business centre has been restored with the island’s removal from the European Union (EU) grey list of non-cooperative tax jurisdictions on Tuesday.
Local authorities have responded to the development saying it sends a positive message worldwide.
Director of International Business in the Ministry of International Business Kevin Hunte said being “completely cleared “is good for Barbados’ reputation”.
“It sends the international signal that Barbados is serious about compliance, regulation and good tax governance principles that are fair to all. Barbados remains open for credible investors of substance and Barbados will continue to make strides in all areas in order to facilitate business,” he added.
A release published by the EU Council, on its website, said Barbados and 15 other countries – Antigua and Barbuda, Armenia, The Bahamas, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, St Kitts and Nevis and Vietnam – managed to implement all the necessary reforms to comply with EU tax good governance principles ahead of the agreed deadline and are therefore removed from Annex II.
Annex II refers to jurisdictions with pending commitments. It now includes The Cayman Islands, Palau, Panama and Seychelles that have been added to the list with eight other countries already identified as non-cooperative tax jurisdictions. The EU claimed these territories did not implement tax reforms, to which they had committed, by the agreed deadline.
“The work on the list of non-cooperative tax jurisdictions is based on a thorough process of assessment, monitoring and dialogue with about 70 third country jurisdictions. Since we started this exercise, 49 countries have implemented the necessary tax reforms to comply with the EU’s criteria. This is an undeniable success. But it is also work in progress and a dynamic process where our methodology and criteria are constantly reviewed,” Croatia’s deputy prime minister and minister of finance Zdravko Marić explained.
The EU Council’s press release also stated that “the list of non-cooperative tax jurisdictions, which is part of the EU’s external strategy for taxation as defined by the Council, is intended to contribute to ongoing efforts to promote tax good governance worldwide”. The list of non-cooperative tax jurisdictions was first established in December 2017.
After an assessment by the EU Code of Conduct Group, a list of non-cooperative jurisdictions for tax purposes was published in January 2019. A number of countries with no or nominal tax was grey-listed based on their efforts of satisfying Criterion 2.2 – not facilitating offshore structures or arrangements aimed at attracting profits that do not reflect real economic activity in the jurisdiction – by December 31, 2019.
In November 2018, the Organization for Economic Cooperation and Development (OECD) implemented a new global standard on Base Erosion and Profit Shifting (BEPS) – Action 5 on Countering Harmful Tax Practices More Effectively. It aimed to prevent business activities from being relocated to countries with no, or nominal tax.
Many countries sought to address these concerns through improved legislation. Barbados enacted the Barbados Companies (Economic Substance) Act 2018-41, which introduced enhanced economic substance requirements for tax purposes from January 1, 2019.
However, Hunte explained that the Act was repealed and replaced in the last quarter of 2019 and the guidelines were also published.
He said this was done to ensure that both the Economic Substance Act and the guidelines were in line with international standards, “while still ensuring they were not too onerous or cumbersome for businesses in Barbados”.
Having complied with the requirements, Barbados is no longer on the grey list.