As Barbados prepares to enter into an International Monetary Fund (IMF) agreement, Owen Arthur is warning that sanctions from international groupings and agencies should not be ignored.
The former Prime Minister has urged Barbados and the rest of the region to form alliances with international partners in an effort to effectively fight onerous rules being imposed by the Organization for Economic Cooperation and Development (OECD) and European Union (EU).
Arthur, who was addressing a University of the West Indies, Cave Hill Campus public lecture earlier this week, said over the years Barbados had suffered a decline in its international business sector, and this was further compounded by the threat to correspondent banking relations.
He warned that if the new OECD Base Erosion and Profit Shifting (BEPS) rules were not “creatively and successfully addressed” the remainder of the island’s international business could be put “under the most severe pressure”.
BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules in order to artificially shift profits to low or no tax jurisdictions.
“The danger that this new threat poses for Barbados is of very significance economic importance,” Arthur said.
“The future of our economy and society may therefore come to depend not only on how we master the design of our programme with the Fund [International Monetary Fund]. It may depend even more on how we address the challenges imposed on us by other international institutions to which we do not belong,” he said.
“To have to grapple with implementing an IMF Extended Fund Facility Programme while fending off a challenge from the European Union or OECD is not a challenge for the faint heart,” he added.
He cautioned members of the Caribbean Community (CARICOM) that they should not solely depend on each other as they fought against the OECD and EU tax rules.
“You can’t only depend on CARICOM. You find allies wherever allies have the same attitude as you do on important matters,” he suggested.
“The European Union, led in large measure by the French Government is under its Base Erosion and Profit Shifting project, once against seeking to force fundamental change in the Barbados Corporate Tax Regime,” Arthur said, adding that “it wishes the distinction between the Corporation tax rates on local companies and that on companies in the offshore and international business sector to be removed,” he added.
This new initiative, he said, could not have come at a worse time for Barbados as it battles one of its worse economic challenges.
“You have to form political alliances with people who have the same views as you and that you should be fighting the European Union in collaboration with the people in England . . . because they have the same view that we do that the bureaucrats in Brussels need to be brought under control,” he said.