The Minister for External Relations and Financial Services, Senator Ian Gorst, has welcomed the clarity brought in a further announcement by the OECD Inclusive Framework on a two-pillar solution for a new global tax framework. Jersey is one of 136 jurisdictions that joined the consensus on the revised framework.
Senator Gorst said: “The Government of Jersey has continued to be fully engaged in detailed discussions on the form and implementation of the new proposed global tax rules, following initial agreement in July. This is important to protect the Island’s interests as a strong, transparent and well-regulated international finance centre.“
The new international tax rules will apply only to the largest global multinational companies and comprises a package, called Pillars One and Two. These two pillars are designed to sit alongside the domestic tax regime of a jurisdiction and apply only to those companies that are in scope. They are not designed to replace a jurisdiction’s domestic tax regime.
The OECD proposals are targeted in scope, focussing on the world’s largest companies and are anticipated to have limited impact on Jersey:
- Pillar One creates new profit allocation rules for the world’s largest multi-national groups of companies (expected to be less than 100), excluding regulated financial services. For that small, targeted group, a portion of their profits would be re-allocated to the jurisdictions where their goods and services are used;
- Pillar Two would introduce a new framework of taxation where companies falling within scope - multinational enterprises that meet a €750 million profit threshold - would pay a Minimum Effective Rate of taxation (MER) on their global profits, calculated on a country-by country basis. The level of the Minimum Effective Rate contained in today’s OECD statement has been set at 15%.
Senator Gorst added: “The Government of Jersey, alongside other jurisdictions, argued in favour of a fixed Minimum Effective Rate, as opposed to the original proposals of a rate of ‘at least 15%’ which lacked certainty. We also supported the maintenance of the €750 million profit threshold, consistent with the existing OECD country-by-country reporting threshold. We are pleased that these important issues have been confirmed in the statement issued on Friday, providing greater certainty for taxpayers and limiting the scope of application of the new rules to the world’s largest companies.”
Pillar One will be a minimum international standard which the Island will be required to implement. Pillar Two contains aspects that will be a minimum standard and aspects that represent a common approach across jurisdictions, and the Government will consider carefully if and how those aspects should be implemented in Jersey.
Senator Gorst concluded:
“We will continue to engage in a proactive way with the OECD, EU and global bodies to combat aggressive tax avoidance and profit shifting, and to develop international tax standards. Our focus continues to be on adding value to the global economy by offering a stable, certain and attractive environment for supporting the growth of cross-border investment in a well-regulated and transparent manner.”
Government of Jersey News Release.