Offshore Financial Centers and the Canadian Economy
The surge in Canadian direct investment abroad (CDIA) is an important component of Canada’s competitive strategy, and has been shown to increase Canada’s trade, capital formation and employment. A large share of CDIA moves through low-tax jurisdictions, also known as offshore financial centers, Barbados being the largest. These jurisdictions serve as conduits for Canadian multinationals to access the global economy.

The analysis presented in this paper demonstrates that CDIA that moves through conduit jurisdictions results in broad-based increases in Canadian exports to the global economy. This evidence is linked to the literature which finds that these increases in trade result in higher levels of Canadian capital formation and employment. These effects must therefore be taken into account in any public discussion of the merits of the use of conduit jurisdictions by Canadian companies.

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By Walid Hejazi
Rotman School of Management
University of Toronto

Barbados Eligible For Dividend Tax Benefits, Says IRS
The United States Internal Revenue Service (IRS) has ended uncertainty by adding Barbados to the list of countries eligible for reduced tax rates on dividends paid by foreign corporations under the 2003 Jobs and Growth Tax Relief Reconciliation Act, the government of Barbados has announced.

The government stated that following three years of uncertainty concerning IRS treatment of the Barbados-US Double Taxation Agreement, the IRS has confirmed that Barbados is a "satisfactory" jurisdiction, able to enjoy the benefit of reduced withholding rates of 15% on dividends paid to individual shareholders from either a domestic corporation or a qualified foreign corporation.

Although dated October 30, 2006, the IRS Notice indicates that with respect to Barbados, the effective date for the accrual of this benefit is as of December 20, 2004.

The Barbadian government said that the important reclassification had come about as a direct result of the successful conclusion of a Second Protocol to the 1984 Barbados-US treaty. This Protocol was signed in July 2004 and entered into force shortly thereafter, on December 20, 2004.

The Second Protocol is intended to ensure that the treaty operates to accomplish its intended purpose of double taxation and the prevention of fiscal evasion with respect to taxes on income.

Barbados has a growing network of international tax treaties. At present these include agreements with Canada, China, Cuba, Venezuela, Malta, Mauritius, Botswana, the United Kingdom, Finland, Sweden, Switzerland, Norway and the Caribbean Community (CARICOM).

A treaty with Austria has been signed and awaits ratification, while it is expected that a Barbados-Netherlands treaty will be signed and enter into force shortly.

By Amanda Banks
Tax-News.com, London
22 November 2006

Barbados Shaped for Success
It has been argued that small economies are incapable of exerting any influence on global economic trends or developments. The Caribbean Community’s response to this commonly held belief has been to redouble its efforts to create the Caribbean version of the European Community through the implementation of the amended treaty of Chaguaramas, thereby giving rise to the CARICOM Single Market and Economy (CSME). The primary economic goal of the CSME is to provide the region with the economic strength necessary to compete in a globalized world free of trade preferences.

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By Francois Hendy
Director of International Business,
Ministry of Industry and International Business, Barbados

Factors Used to Determine Whether Offshore Trusts Are The Right Choice Have Evolved
OFFSHORE TRUSTS have been used by high-net worth U.S. citizens and resident aliens for decades. In fact, up until the 1960s and, to some extent the 1970s, moving some of one's assets offshore provided a three-pronged solution to the important issues of asset protection, investment diversification and tax minimization.
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Consequently, the Government of Barbados and the Government of Mauritius signed an Agreement for the Avoidance of Double Taxation and a Bilateral Investment Treaty on September 28, 2004.

This latest treaty will provide easier access for Barbadian enterprises and entrepreneurs wishing to access the Asian market. Similarly, Mauritians can now access tax and other incentives when doing business within the CARICOM Single Market and Economy.

Earlier this year, the 2^nd Protocol to the U.S.-Barbados Double Taxation Treaty was signed in July.

As of October 2004, the Government of Barbados signed a Double Taxation Treaty with the following countries:

In addition, a Bilateral Investment Treaty was signed between the Government of Barbados and the government of the following countries:

October 4, 2004

Some key changes to The Societies with Restricted Liabilities (SRLs):

• Removal on the restriction of the life of the Society (previously limited to 50 years)
• Deletion of Section 19 (section 19 previously legislated for a minimum of two members)
• A Barbados incorporated SRL can now do business in the CARICOM region and is no longer restricted to extra-regional markets.

The agreement focuses on the modernisation of the anti-treaty shopping provisions, which ensures that benefits of the income tax treaty are exclusively for bona fide residents of the United States and Barbados. It contains modifications to address the concerns about inappropriate exploitation of treaty benefits and ensures that the treaty operates to accomplish its intended use of addressing double taxation.

Please click on the link below to read more about the US-Barbados Income Tax Protocol.
http://www.treasury.gov/press/releases/js1786.htm

Internet, e-commerce opens electronic avenues for fraudsters
by Peter Fatijewski, a Certified Fraud Examiner with Forensic Accounting and Investigative Services (FAIS) and Kevin Melnichuk, a Manager with FAIS.

This article, recently published in The Bottom Line, discusses the threats to corporations from identity theft. As our reliance on technology increases, corporations need to be aware of internal and external threats to their corporate identities - some of which are often overlooked.

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Source: Grant Thornton LLP
Chartered Accountants
Management Consultants