Sir Trevor Carmichael of Chancery Chambers in Bridgetown looks at the latest developments in the Barbados market
Barbados continues to exhibit its traditional resilience of spirit matched with an ongoing penchant for innovation and change. Its stellar record as a tax treaty jurisdiction with a steady growing number of sovereign nations underscores an ongoing policy of active financial engagement globally. Yet, a distinguishing feature of the jurisdiction's commitment to such engagement is the ongoing dedication to diversifying the product mix of varied activities which are arrived at ensuring its safe path of financial and sound enforcement.
Over the past year the jurisdiction launched a demonstration and education centre dedicated to the new and smart practice of Permaculture. Titled as The Caribbean Permaculture Research Institute of Barbados (CPRI), it is now actively engaged in teaching both Barbadians as well as international visitors the key elements of a permacultural way of living namely how to grow food, repair land and build a community. The technique of an effective permaculture programme is the combination of the descriptive knowledge of modern science and the wisdom of ancestors. As a jurisdiction with a substantially high food import bill an effective permaculture programme will enhance regeneration, make proper use of scarce water resources and with natural organic methods ensure protection of the island's biodiversity Organised as a non-profit company CPRI is busily engaged in an active outreach programme which has identified the important objective of fund raising, both at an individual as well an institutional level.
This new development within the private sector is matched by the gradually recovering financial system over the latter half of 2014 and first quarter of 2015. Commercial banks recorded 1.4% growth in credit, while the credit unions expansion was a very substantial 6.7% despite having a smaller base. Deposit taking institutions continue to be well capitalised, with banks in particular possessing capital levels which make them extremely resilient to any substantial economic shocks. Credit risk within commercial banks has remained contained as net write-offs continued to average less than one percent per year of total loans. The domestic insurance sector alone recorded continued growth in premiums, especially in the life insurance subsector. This industry also increased its holdings of domestic debt in 2014 in contrast to a marginal reduction in the holdings of the general insurance industry. The assets of the domestic fund management industry increased by 2.3% and the expansion was essentially concentrated in the growth and income funds. As the year evolved, inferences from stress tests are indicative of a very stable financial system. Furthermore capital reserves which are set aside by institutions to protect against unexpected losses are sufficient to buttress significant adverse occurrences. Barbados' regulatory authorities continue to consolidate efforts to enhance the supervisory framework. Its Central Bank processes guidelines on measuring capital adequacy for controlling interest rate risks on the banking book.
The Barbados treaties reflect a consistently expanding internationalism. For the yearly contribution of Barbados' international business sector now exceeds $150 million, and represents approximately 60% of all corporate taxes. It has accounted for approximately 12% of total government revenues since the year 2005. Currently, international business companies and exempt insurance companies in particular, continue to manifest significant increases; and international insurance and global reinsurance structures continue to establish and relocate their centres of operations in Barbados. Indeed, international business companies have shown significant increases over both periods of the liquidity crisis and the international recession. From licence fees alone, Barbados now collects yearly in excess of $6 million. It is clearly accelerating benefits from an international sector, which may safely be seen to be outperforming in a recessionary environment. Indeed, Barbados was accorded an appropriate accolade when the OECD in its report “A Progress Report on the Jurisdictions Surveyed by the OECD Global Forum in Implementing the Internationally Agreed Tax Standard” recognised it as the only independent Caribbean nation which had substantially implemented the internationally agreed tax standard. Furthermore, Barbados has now long met the OECD requirements for the exchange of information on request in all tax matters. It has been recognised in the Global Competitive Report with an overall competitiveness rating as third in Latin America/The Caribbean, and 44th worldwide; its soundness of banks as 4th in Latin America/Caribbean and its availability of latest technologies as 2nd in Latin America/Caribbean, and 29th worldwide.
In addition, Barbados has been given international endorsement by agencies such as United Nations Development Program, which ranked it as 4th worldwide out of 177 countries in terms of literacy; and the Human Development Report has consistently ranked it as 1st in Latin America and the Caribbean and 37th worldwide out of 179 countries in its human development index. Transparency International in its corruption perceptions index has ranked Barbados as 2nd in Latin America/Caribbean and 22nd worldwide out of 180 countries. These solid institution building and retaining features have enured to the benefit of Barbados in the recessionary environment, and have allowed its planners to continue to explore and carve out new niche areas along with strengthening its existing foundations. They have all served as a buttress to the expanding tax treaty network.
With a robust and resilient economy, Barbados continues to be safely poised to benefit from its exemplary private sector and its efficient government agencies; and in the ongoing process of collaboration and advancement to ensure the jurisdiction's ongoing diversification in a truly dedicated fashion.
Sir Trevor Carmichael