Barbados’ removal from the European Union’s tax “grey list” has been hailed as a hard-won reputational reset for the country, but leaves a critical test as to whether that hard-earned credibility will yield tangible economic benefits, according to University of the West Indies economist Professor Troy Prof Lorde.
The development ends years of international scrutiny and confirms the island’s full compliance with global tax governance standards.
“Grey list removal is reputational capital,” said Prof Lorde, dean and deputy director of the UWI Shridath Ramphal Centre. “What Barbados does with that capital will determine whether this moment is a milestone or merely maintenance.
“The deeper reality is that Barbados has completed its transition from crisis management to permanent regulatory integration within the global tax order.”
The question now facing the country has now shifted decisively, he said. “It is whether Barbados can convert compliance credibility into higher per capita income growth, economic complexity, real wage expansion and shock resilience.”
Prof Lorde argued that Barbados’ exit from the list reflects “three interlocking shifts: a consolidation of the post-BERT regulatory state, a re-positioning in the global tax order and a deepening of a development model increasingly anchored in compliance credibility”.
“Regulatory credibility has become a core pillar of the Barbadian growth model,” he said, adding that it signals to capital markets that Barbados is “a low-risk jurisdiction in an era of geopolitical fragmentation and financial weaponisation”.
In its latest list of tax jurisdictions published on Tuesday, the EU named Barbados among 33 countries that cooperate with the bloc and have no pending commitments. The “grey list” previously applied to jurisdictions that cooperated but still faced outstanding obligations, while the “black list” targets countries deemed non-cooperative in efforts to combat tax evasion, fraud and avoidance.
The EU said Barbados has now met all its commitments against tax fraud, evasion and avoidance, removing constraints that had increased due diligence costs for firms and weighed on the country’s international reputation.
In immediate reaction, Minister of Finance Ryan Straughn described the development as a breakthrough after more than seven years of “really, really, really hard work”, saying it allows Barbados to move “full steam ahead” in promoting itself as a preferred investment hub compliant with international tax and business standards.
But Professor Lorde cautioned that the political economy underpinning global compliance regimes remains uneven.
“For Barbados, grey listing meant transactional friction for firms, higher due diligence costs, reputational shadowing in correspondent banking and implicit signalling risk to international investors,” he said. “Removal therefore reduces frictional costs in capital mobility. But it also confirms that the Barbadian state has accepted a permanent position within a compliance hierarchy dominated by [Organisation for Economic Cooperation and Development] and EU norms.”
For a tourism-dependent, capital-importing small state, he said that trade-off is rational but “not neutral”.
Barbados’ current positioning rests on three pillars: political stability, IMF-endorsed macro discipline and EU and OECD regulatory compliance, with the development bet that credibility will attract higher-quality capital rather than merely mobile capital, according to Prof Lorde.
“Barbados today is far more compliance-intensive than it was a decade ago.” he said.
But the UWI economist warned that removal from the grey list does not automatically deliver new industries, export diversification, higher wages or technological upgrading.
“It removes a barrier. It does not create growth,” he said, cautioning that without parallel productive transformation Barbados risks becoming “a highly compliant low-growth economy”.
He also pointed to broader strategic implications as Barbados deepens its anchoring within the Western regulatory sphere at a time when alternative financial architectures are emerging globally. Alignment offers access to European capital markets, reassurance for correspondent banking and enhanced treaty credibility, but also narrows manoeuvring space in an increasingly multipolar financial system.
For CARICOM, Barbados’ removal could strengthen the region’s argument against arbitrary listing, even as it underscores that the prevailing path remains compliance rather than confrontation, he said.
Barbados’ removal from the grey list opens three distinct strategic paths: a passive relief scenario in which policy momentum slows and compliance becomes an end in itself; a reputational leverage approach that markets Barbados as the Caribbean’s most compliant jurisdiction to attract climate finance, investment and specialised financial services aligned with economic, social and governance (ESG) values; or a productivity conversion strategy that uses compliance credibility as a foundation for high-value service exports, knowledge-intensive firms, supervised fintech expansion and broader treaty networks.
“Only the third path materially shifts development outcomes,” he said.
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