13/04/22

JERSEY: Jurisdiction could net millions from global tax reforms.

As published on jerseyeveningpost.com, Wednesday 13 April, 2022.

Jersey could collect tens of millions from global business giants such as Amazon as part of new international tax rules.

The government has confirmed it will apply the reforms, which enable tax to be collected from super-size companies in the countries they operate in, from the start of next year.

And as soon as 2024 the government could also introduce a global-minimum tax rate of 15% for companies headquartered in the Island with a turnover of more than 750 million euros per year. It is believed around 1,000 firms could be affected.

More details on the exact form of both measures are due to be published later this year.

External Relations Minister Ian Gorst said that there was no indication at this stage how much extra revenue might be raised but suggested the new 15% band could see the government coffers boosted by tens of millions annually.

The minister said that the rate was compatible with the existing zero-ten corporation tax system, under which firms pay 0%, 10% or 20% tax depending on their sector.

He said that whether zero-ten remained fit-for-purpose in the longer term would be a matter for future governments and ministers.

The tax reforms – divided into ‘pillar one’ and ‘pillar two’ – are part of a global framework being put together by the Organisation for Economic Co-operation and Development involving more than 130 countries.

The aim is to ensure multinationals pay fair amounts of tax in the jurisdictions where they operate.

Pillar one concerns making multinationals with annual global turnover of more than 20 billion euros pay more tax where they do business, while pillar two relates to the global minimum corporation tax rate.

Senator Gorst said that around 1,000 of the 40,000 companies based in Jersey would probably be affected by pillar two.

‘The maximum number that would be affected is 1,000, so we are talking around no more than 2%,’ he said.

He added that research carried out in Guernsey, which is also looking to sign up to the framework, suggested it could earn £10 million a year from pillar two, and Jersey could potentially earn much more than this.

‘We have not seen the basis of that calculation. It’s fair to assume that Jersey’s number could be a multiple of that £10 million.

‘But it’s really important that the decisions we make are based on our competitiveness and our long-term interest, not on that short-term revenue-raising measure,’ the minister said.

In terms of ensuring pillar-one taxes can be collected, Senator Gorst said that Revenue Jersey had carried out a large information-gathering exercise around that issue.

‘Companies have been having to do returns to Revenue Jersey as part of all this transformation work,’ he said.

‘They know today much more information than they did even three years ago about what all companies with any nexus to Jersey are doing, what their trade is, what their turnover is, what their profit is – all of those things, even if they’re not currently captured for tax.’

The government has already moved to gather more tax from retailers outside Jersey, by seeking to drop the de minimis level – the threshold at which Islanders pay GST on goods bought outside the Island – from £135 to £60, and possibly eventually to zero. A date has not yet been set for the changes.

INTERNATIONAL TAX: Companies c…