Canadian firms pulling out in the wake of new tax law
At least two locally based foreign companies have shut down or shifted operations from Barbados so far, as tax measures in Canada begin affecting the country’s lucrative international business sector, Minister of Finance Chris Sinckler has revealed.
He said the recent decision by the companies, one of which has been operating here for more than a dozen years, has compounded the problems for the sector, which raked in about $230 million less in revenue dating back to 2008.
Sinckler did not reveal names but Barbados TODAY understands that Oxbridge Bank & Trust, which operates from Warrens, St Michael, has served notice to staff and clients that it will be closing at the end of September after more than ten years in operation here.
Officials with intimate knowledge of the sector also describe the situation as “serious”, saying more banks were likely to follow.
However, while confirming that Oxford Bank and Trust would definitely be leaving, the President of the Barbados International Business Association (BIBA) Ryle Weekes said other companies had indicated they would be staying put, despite the new Canadian regulations.
“We have an unconfirmed report that one other bank will be closing but we don’t have the name of that as yet,” he also told Barbados TODAY, adding that BIBA has been holding talks with the Banking Committees to assess the situation.
Speaking during his wrap-up of the Estimates of Revenue and Expenditure in the House of Assembly today, Sinckler hinted that the situation would likely worsen.
“We met . . . with one of them [bank representatives] and the only thing the man didn’t do is cry. He lamented the fact that for the past 15 to 16 odd years he has been operating in Barbados, a major bank doing very, very well, and it pained him to take that decision that week to have that bank close down,” he said.
“[The banks] now have to find a host that meets that requirement and if they can’t, and frankly some of them are not going to be able to, they’re going to have to have to shift those operations to some other part of their overall group or get out of that business all together.”
Minister Sinckler said Government was already struggling to cope with a $120 million fall-off in corporate tax revenue between 2008 and 2011, with the international businesses responsible for $120 million of that amount.
Late last month, officials in the financial services sector held a panel discussion on The Implications Of The 2014 Canadian Federal Budget For Barbados As An International Business And Financial Services Centre.
During the discussion, experts warned that companies, especially those which do business through a swapping arrangement of their insurance risks, would be negatively affected.
At that time, Minister of International Business Donville Inniss said that Government did not believe “political interference” was necessary though it would use diplomatic channels to deal with the situation while leaving industry players to deal directly with the matter.
Meantime, while noting that the gains in the sector, which generates about $870 million annually, were being eroded since pre-2008, the Minister of Finance today urged Barbadians “to wake up and smell the coffee”, as the country looks to shift its growth focus.
He noted that times have shown that the services-based model on tourism, international business and financial sector has been “severely weakened and will not come back again in the way we expect it.”
Barbadians, he said, would now have to alter how they do business of gather and sustain economic growth.