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New global tax rules are set to increase incomes in affected jurisdictions by up to one third, a new report has indicated – but Jersey's Government is yet to confirm how much the island's coffers will benefit.
The global minimum tax rules initiated by the Organisation for Economic Co-operation and Development were brought into force on 1 January in the UK and the European Union, with pledges by Jersey and the other Crown Dependencies to implement the rules in 2025.
The global minimum tax, originally agreed in principle by more than 140 countries in 2021 and known as the 'OECD Pillar 2 initiative', is designed to stop a decades-long downward spiral in headline corporate tax rates worldwide.
Under a series of interlocking rules, if profit by a multinational is taxed below 15% in one country, other countries will be able to charge a 'top-up' levy.
An OECD working paper published on Tuesday (9 January), estimated that participating jurisdictions categorised as “investment hubs” would have the largest expected gains from the reforms, with corporate income tax revenues rising by at least 14%, up to a maximum of 34%.
The OECD, which oversaw negotiations on the tax reforms, defines investment hubs as jurisdictions where inward foreign direct investment accounts for more than 150 per cent of gross domestic product.
These include jurisdictions such as Bermuda, the British Virgin Islands, Ireland, Jersey, Guernsey, Luxembourg, Netherlands, Switzerland and Singapore.
Jersey's Government has indicated that it is working actively on proposals to introduce the OECD Pillar 2 initiative, which applies to multinational groups of companies with global turnover above €750m.
It is understood that the vast majority of companies in Jersey will be unaffected by Pillar 2 and will remain in the existing corporate income tax regime.
The proposals for implementation of the minimum tax in Jersey have yet to be finalised, with the Government continuing to monitor the timetable for implementation elsewhere, but the joint pledge by the Crown Dependencies in May 2023 remains on track.
In the 2023 pledge, it was stated: “The Islands will continue to work together, monitoring implementation internationally and adapt accordingly to developments which may require adjustments to our own implementation plans, and remain committed to continuing to offer attractive and globally competitive investment environments.
“The Islands will continue to engage with diverse and widespread stakeholders – across a very broad range of sectors and geographies – to gather further information and to provide appropriate notice to allow businesses to prepare for these changes."
Pictured: Treasury Minister Ian Gorst, who is leading work on the OECD initiative.
It added: “We are proud of our global leadership in tax cooperation, combatting money laundering and countering the financing of terrorism, and in providing appropriate and effective transparency.”
The Government has indicated that Jersey's proposals will be finalised, consulted on and presented to the States Assembly later this year, but that it is unable to speculate about any revenue gains that may be generated until then.
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