Government has moved a step closer to reforming its indirect tax system.
This disclosure has come from Director of Finance, Ian Carrington. He said the International Monetary Fund (IMF) and the World Bank had been invited to provide the country with technical assistance by looking at its indirect taxes relative to corporate taxes, so as to bring them back into balance.
Mr. Carrington stated that the IMF tax officials were currently on the island examining the various taxes, namely VAT, income tax, stamp duty, and betting and gaming. He added 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. 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 explained.
Mr. Carrington said since Barbados was in an IMF programme, Government had to make sure no deficiency in revenue was created. He continued: “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.”
He added that 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.