Scrutiny to review potential impact of "significant" tax reform

Friday 30 August 2024

Those set to be impacted by a "significant" change in Jersey's tax regime are being invited to submit their views to a panel of politicians tasked with reviewing the proposed reform.

The proposed changes to Jersey’s tax regime would be implemented by the adoption of the Organisation for Economic Cooperation and Development’s (OECD) Pillar 2 initiative.

Under the OECD agreement, Jersey needs to implement a 15% minimum tax on the profits of the largest multinationals.

The change has been branded as "the most significant tax reform in recent years" by Deputy Jonathan Renouf, the Chair of the OECD Pillar 2 Implementation Sub-Panel – which is leading the review.

Treasury Minister Elaine Millar and External Relations Minister Ian Gorst have said they aim to put the legislation to the States Assembly on 1 October.

The Scrutiny review will consider how the Government’s proposed approach to implementing these new standards will impact the island’s financial competitiveness compared to other jurisdictions, as well as the impact on those targeted businesses based in the island. 

It will also evaluate the long-term sustainability and risks of the proposals.

What is the Pillar 2 initiative?

Under an initiative from the OECD – which nearly all members, including Jersey, have signed up to – the profits of multinational enterprises above a certain threshold will be taxed at a minimum of 15%, regardless of where they are based.

This initiative aims to stop the largest multinationals to dodge taxes by moving their headquarters to tax havens.

So far, Jersey has been able to attract business over many years by keeping its corporate tax rate at 0%, with financial services businesses taxed 10%.

The legislation would only affect the largest businesses – those with global annual revenues higher than €750 million.

"It's hoped it will enhance our competitiveness and reputation"

The review panel – a sub-panel of the Corporate Services Scrutiny Panel – is chaired by Deputy Jonathan Renouf and includes Deputies Monty Tadier, Max Andrews, Hilary Jeune, and Constable David Johnson.

They have already received briefings, according to the States Greffe, and are expected to hold a hearing with Deputies Gorst and Millar.

Pictured: Deputy Jonathan Renouf is set to chair the review panel. (Dave Ferguson)

Deputy Renouf said: "The OECD Pillar 2 initiative is a significant international tax reform which will have global implications for international tax policy and corporate tax strategies.

"It will require significant changes to Jersey’s regulatory framework and tax policies, but it’s hoped it will enhance our competitiveness and reputation as a transparent international finance centre. We as a Panel want to ensure that this initiative is introduced in a way that works for Jersey’s benefit."

A Scrutiny Sub-Panel has been formed to review the proposed changes to Jersey's tax regime through the adoption of the OECD Pillar 2 initiative.
This aims to establish a global minimum tax rate on the profits of multinational businesses.
The Panel will be assessing the… pic.twitter.com/yS9ssMsKgF

— States Assembly - Jersey's elected parliament (@StatesAssembly) August 29, 2024

Deputy Hilary Jeune wrote on X (formerly Twitter) that she had worked "at the edges" of the reform for several years, working with Oxfam's campaign on inequality.

She added that she was "glad" to be joining the Panel.

HAVE YOUR SAY...

Anyone who wants to make a submission to the review can do so on the States website.