Every cent will be accounted for, says PM

Prime Minister Mia Amor Mottley is stoutly defending the contents of the Economic Diversification and Growth Fund Bill, making it clear there will be no investment or subsidies given to any foreign company that does not significantly expand employment in Barbados by providing more than 100 jobs and earn foreign exchange for the Barbados economy.

She also said these companies will pay tax at nine per cent and not the reduced rates of 2.5 per cent declining to 1.5 per cent that existed previously.

In a statement yesterday to this newspaper, Mottley said the Bill was designed and would be implemented with clear objectives – to protect and grow jobs, enhance foreign and domestic investment and grow the economy for all Barbadians.

‘Plainly political’ “A lot has been said publicly about it, much of it highly emotional and in some cases plainly political. I understand why some people may feel uneasy or a bit confused when they hear only the loudest voices, but once we slow down and look at the facts, a clearer and more balanced picture emerges,” she said.

The Prime Minister said it was important to note that Barbados and Barbadians would be the net beneficiaries from the operations of the fund.

“It has been designed for the country and its citizens to win, not lose, in an increasingly hostile global environment for small states,” she said.

Mottley added: “At the same time, local companies continue to benefit from a number of supports. As mentioned before, small businesses enjoy much lower taxation at 5.5 per cent. In addition, where applicable, they have ready access to supportive entities such as the Industrial Credit Fund, the Agricultural Development Fund, the BEST Programme for Tourism and the Small Hotels Investment Fund, to mention a few.

“On the issue of governance and administration, the system could not be stronger, nor the process more transparent and independent. The legislation makes it clear that every cent taken into the fund and subsequently spent will be accounted for.

“The fund is administered by the Accountant General and audited by the Auditor General. The Advisory Committee is extremely broad-based and includes key public servants and members of the private sector. The minister acts on the advice of both this committee and the National Growth Council, all of whose members are outside of Government and the partisan political class. These are the clear guardrails that have been put in place to protect the public interest.”

The Prime Minister said that at the end of the day, this Bill was about saving real jobs and securing new ones, while maintaining and improving the instruments the country already has for local companies to benefit in tangible ways.

Unacceptable

She noted that under the previous Democratic Labour Party administration, foreign international business companies (IBCs) were taxed at a rate of 2.5 per cent or less, while local companies were taxed at 25 per cent. This arrangement, she said, was considered by international regulators to be unacceptable “ring-fencing” in favour of foreign companies and it placed local companies at a significant disadvantage in their own country.

The Mottley Administration, she said, addressed this imbalance.

“Today, local small business companies are taxed at 5.5 per cent, while all other companies – foreign and local – are taxed at nine per cent. Foreign entities now pay a much higher rate than they previously did,” she said.

However, she pointed out that if Barbados does not take other steps to keep itself attractive to foreign investors, it stands to not only lose companies already operating here, but could also become unattractive to new investors.

“Simply put, if we do not act now and act decisively, hundreds of jobs could be lost and millions of dollars in tax revenue wiped from our revenue streams. So the question becomes: what can we, as Barbadians do to encourage foreign companies to invest in Barbados without risking blacklisting or undermining our tax policy under OECD [Organisation for Economic Cooperation and Development] rules?

“Our courageous tax reform has already brought substantially more revenue. More will come this year and next year. We have shared part of this with Bajans. We must, however, also reserve a portion of this to remain competitive and attract significant businesses and sectors to attract more jobs for Bajans and to earn foreign exchange to keep our economy stable,” she said.

Mottley said the answer was to design a policy that strikes a careful balance – one that maintains the country’s reputation as a globally competitive investment jurisdiction, while staying firmly within acceptable international norms on taxation.

“The reality is that the old days of granting foreign companies tax concessions to artificially reduce their tax liability are over,” she said.

The Prime Minister further stated that the Bill was designed to address that specific challenge.

“It augments the options available to us to keep Barbados attractive for investment that earns foreign exchange, creates jobs and still provides tax revenue for the country,” she said.

Beneficial

“We have had to move to an option like this for foreign companies but even so, we have ensured that local companies with a foreign presence can also benefit. Other local companies will continue to benefit in different ways through existing mechanisms.”

Regarding the contents of the Bill, Mottley said to those who believed this was not the right time to do this, “we simply say, there is no wrong time to do the right thing for Barbados and Barbadians”.

(CM)

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