In October, 2003, all taxes on computer hardware and software were eliminated as the government attempted to encourage development in hi-tech business and information technology. According to Senator Phillip C. Goddard the measure is just one of a series of initiatives being used to spur investment in the IT sector in the jurisdiction, including an updated consumer protection law and a new electronic communications bill. He also revealed the government was working on online privacy legislation and an anti-computer crime law.
KPMG's Information Security Survey 2002 had revealed serious concerns regarding Barbados' e-commerce development, particularly in terms of security measures. According to KPMG Technology Parter, Brenda Pope, online security risks were not being adequately managed by the 56 Barbadian firms which participated in the survey, despite the fact that the issue is becoming increasingly crucial as more and more international businesses seek to conduct transactions over the internet. Ms Pope revealed that of the companies surveyed, only 16% were engaged in actual e-commerce transactions, with the majority (56%) using the internet to promote corporate image, or for information exchange.
The natural bonding of the Internet and Offshore stems from the fact that both, of their nature, manage to avoid tax. Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore jurisdictions; while business that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.
As an expanding offshore jurisdiction with many thousands of offshore enterprises already installed, including many trading companies, it is only a matter of time before Barbados becomes a centre of e-commerce activity. The island's geographical location, its good telecommunications links and its sophisticated business infrastructure add to the inevitability of an e-future for Barbados.
By locating websites in Barbados to carry out functions previously based in high-tax jurisdictions such as sales and marketing, treasury management, supply of financial services, and most of all, the supply of digital goods such as music, video, training, software etc, businesses can take advantage of low rates of taxation for increasingly substantial parts of their operation.
In many countries, the distribution of goods from a warehousing facility does not constitute the carrying on of a trade or business in that jurisdiction, so that even for physical goods, in many case it will be possible to avoid a permanent establishment (taxable presence) altogether in many high-tax jurisdictions where trading activities currently take place.
A company operating an e-commerce facility in Barbados will be able to use International Business Company or Foreign Sales Corporation status. Unlike most of its island competitors, Barbados has been building up a well-trained, specialised pool of computer workers, who will give it a head start in developing e-commerce applications.
For information about the impact of e-commerce on some of the offshore activities which take place in Barbados, click on a link below to go to our specialist E-commerce site Offshore-e-com.com
To see an analysis of the current state of legal and tax issues surrounding offshore e-commerce, click here.