Assignment 1.

1: Post-independence income
tax legislation
Describe Post-independence income tax legislation based on Class
text book- Income Tax Law in the Commonwealth Caribbean by
Claude H Denbow. Post this assignment in a *.doc format using
the link for Assignment 1.1. By the beginning of Week 2, the
facilitator will provide feedback and give you a grade. To view this
feedback, using the same link as for uploading the assignment.
The Post-Independence period in the Commonwealth Caribbean led to some significant
changes to the income tax laws of these former colonies. Though the fundamental groundwork as
per the Model of Ordinance remained, three major areas of legislative changes would take place
with the intent of limiting evasion of taxes or the leaking of taxes to foreign countries through
transnational corporations(Any corporation that is registered and operates in more than one
country at a time; also called a multinational corporation.). These included firstly the
amendment of laws concerning the taxation of income that flowed out of Commonwealth
colonies such as those related to a foreign multinational operating within a particular
Commonwealth country. Until this time the organization would transfers earnings such as those
relating to royalties, management fees etc. to the parent company abroad and avoid taxes from
the country of operation. The Post-Independence period in the Commonwealth Caribbean would
however see legislation that would now rendered Multinational Corporation responsible to pay a
portion of taxes in the country of operation as per those fees to be transferred abroad. While the
organization is still obligated to withhold taxes at a specific rate as per its gross dividend,
royalties and managements fees etc. it must disclose to the Revenue Authorities statements as per
taxes withheld.

Secondly legislative enactments in the Commonwealth Caribbean countries would now

place strict boundaries on the multinationals (MNCs) to prevent them from leaking most or too
much of its profits out of the country of operation through taxable techniques like charging large
management fees. The legislation would specify some amount deductible as expenditure to avoid
hefty loss of tax revenue. The legislation would in effect place a limit on the amount deductible
for management charges, fees and royalties paid by subsidiary companies or a branch operating
in a particular country to a non-resident company or the head office of the branch respectively.
Thirdly some countries of the Commonwealth Caribbean would enact laws that sort to
counteract the abuses related to transfer pricing or inter-company pricing between Multinational
Corporation and their local subsidiaries.

Reference
Denbow, Claude (2007). Income Tax Law in the Commonwealth Caribbean.West Sussex: Tottel
Publishing