Barbados, a late comer to the financial services industry, is third only to the US and Britain as a destination for Canadian funds. According to a recent report appearing in the US News & World Report, Barbados earned $200 million from its financial services sector.
The report was written Marci McDonald, a contributing editor of US News & World Report and a former Washington Bureau chief for MacLeanﾴs magazine, Canadaﾴs leading weekly news magazine.
While The Bahamas was busy accommodating the OECD and its dubious claims, Barbados challenged them and today has seen the assets of major Canadian firms registered in Barbados grow by 3,600 percent, from CAN$628 million to CAN$23 billion.
The growth was achieved by the provisions of the 23-year-old Canada-Barbados double taxation treaty and Canadian tax regulations which allow firms with International Business Companies (IBC) registered in the Caribbean country to reduce their Canadian tax bill. The much maligned IBCs are presently fueling Barbadosﾴ growth as the preferred destination in the region for major Canadian businesses.
Canadian tax regulations allow firms with International Business Companies registered in Barbados to reduce their Canadian tax bill. By establishing an IBC in Barbados, Canadian firms pay between one to 2.5 per cent tax to Barbados instead of the 28 per cent in Canada.
ﾓIn 1990, Canadian corporations repatriated $400 million in tax-free dividends from Barbados subsidiaries,ﾔ stated McDonald. ﾓBy 2000, that amount had skyrocketed to $1.5 billion.ﾔ
Virtually every major Canadian corporation, added the writer, has used concessions in Canadaﾴs laws to reduce their tax bills by creating a foreign affiliate in Barbados, which is called an international business company (IBC). One such company is Canada Steamship Lines International Division whose headquarters are in Barbados.
These subsidiaries are perfectly legal entities, and their owners and managers are simply taking advantage of a ﾓloopholeﾔ in Canadaﾴs tax rules, McDonald, points out.
In addition, Barbados provides Canadian corporations with an aura of respectability when, they register IBCs in Bridgetown in order to reduce their tax liabilities, because ﾓBarbados didnﾴt have the same taint as setting up a brass-plaque bank in some secret zero-tax paradise where the airport arrival lounge was filled with bulky men in shades gripping cash-stuffed gym bags,ﾔ stated the writer.
Once the taxes have been paid to the Barbados government, the remaining profits are remitted to a head office in Toronto or Montreal in the form of dividends, ﾓsafe from Revenue Canadaﾴs clutches.ﾔ
The Bahama Journal
