Business Barbados 2022

Global Tax System Reform The Wheels are Spinning Faster than Ever The future of tax policy around the world is witnessing a historic change, as lawmakers of the inclusive framework member countries move ahead with great speed to bring the challenges addressed under Base Erosion and Profit Shifting (BEPS) 2.0 within the realm of their legislation. BEPS 2.0 is a two-pillar solution designed to address the tax challenges arising from the digitalization of the economy. It was agreed to by 137 out of 141 countries of the Organisation for Economic Cooperation and Development’s (OECD) inclusive framework and was endorsed by the G20 members in October of last year. Pillar 1 addresses the broader challenges of the digitalization of the economy and the allocation of taxing rights to market jurisdictions. Pillar 2 deals with the remaining concerns about potential base erosion and profit shifting as well as tax rate competition among countries. The OECD Secretary-General’s Tax Report to G20 Finance Ministers and Central Bank Governors published in October 2021 includes a two-page ‘detailed implementation plan’. Briefly, it Dipesh Panicker Senior Tax Manager, Tax Services, EY proposes that Pillar 1 will be introduced by way of a multilateral convention (the MLC). Pillar 2 will be implemented through domestic legislation based on OECD developed ‘Model Rules’. The target deadline for introducing both measures is 2023. The OECD kept its side of the bargain by publishing detailed rules in December 2021. These are designed to help in the implementation of a landmark reform to the global tax system, which will ensure Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023. In this article, we will focus on Pillar 2, which will introduce a global minimum tax rate of 15%, and its impact on Barbados. The country currently has a sliding corporate tax rate of between 5.5 per cent and 1.0 per cent. While the proposed minimum tax rate is estimated to generate nearly USD 150 billion in additional global tax revenues annually, there is grave concern on whether Pillar 2 would further erode the attractiveness of low tax jurisdictions like Barbados. Changing Landscape Within the last 5 years, Barbados has been under the increased scrutiny of the European Union and OECD to adopt La-Tanya Edwards-Philips Associate Partner, Tax Services, EY 57 BUSINESS BARBADOS 2022 G L O B A L T A X S Y S T E M R E F O R M

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