PRESSURE IS MOUNTING on Barbados to “dismantle” a number of incentive programmes deemed to be “offending” World Trade Organisation (WTO) rules, including one that has been helping local manufacturers since 1974.
It is an outcome that might force the Freundel Stuart administration to provide “some form of compensation” – worth millions of dollars – to Arawak Cement Company Limited, ABM Woodcraft Limited, TT Electronics, and A-One Specialty Shade Products Limited.
That’s because even though the tax holidays these companies accessed under Government’s Fiscal Incentive Programme were to have expired either next year or 2017, the WTO’s General Council has ruled that they have to end by December 31 this year.
The WTO has also mandated Barbados to wind up a number of other “incentives programmes targeted solely or partly at the promotion of exports” by that date.
The “export subsidies” programmes identified were the Export Allowance Scheme, the Research and Development Allowance Scheme, the International Business Incentives Programme, and the Societies With Restricted Liability Scheme.
BARBADOS BUSINESS AUTHORITY investigations revealed that concern that Barbados still had these incentive programmes in place was one of several concerns raised when a Barbados delegation led by Minister of Foreign Affairs and Foreign Trade Senator Maxine McClean visited the WTO’s Geneva, Switzerland headquarters for Barbados’ latest trade policy review last Tuesday and Thursday.
A report from that meeting said WTO members “requested information on the steps taken since the last notification to ensure the timely dismantlement of the measures”.
They complained that even though Barbados had identified the mentioned programmes as export subsidies, and notified the WTO as required, it still implemented them between 2008 and last year.
Access to the Fiscal Incentive Programme, under which companies benefitted from $70.9 million in tax breaks between 2007 and 2011 alone, has to be approved by Cabinet and monitored by the Barbados Investment and Development Corporation.
Approved enterprises are granted an 11 to 15 year corporation tax, value added tax and customs duties holiday. In the case of customs duties, ease is granted on “all imports of plant, equipment, machinery, spare parts, raw materials and components thereof required by the approved enterprise in the manufacture of an approved product, where such articles are not available in CARICOM”.
The companies that will be affected by the WTO December deadline are Arawak Cement Company Limited (granted a 10 year tax holiday on cement and clinker – due to expire on December 31, 2016); A-One Specialty Shad Products Limited (granted a 15 year tax holiday on approved product blinds and market umbrellas – due to expire on January 1, 2017); TT Electronics (granted a 15-year tax holiday on high wattage/custom assemblies and metal film resistors – due to expire on April 30, 2017); and ABM Woodcraft Limited (granted a 15-year tax holiday on wooden cabinets and wooden structures – due to expire on July 1, 2017).
Some other companies have tax breaks that will end within the WTO deadline, namely Crown Packaging (Barbados) Limited, whose seven year tax holiday on metal cans, caps, seals for cans and bottles expires on July 29, and Caribbean Lighting Inc., which has a three-year tax holiday for light emitting diode lamps that ends on December 31.