The Minister for External Relations and Financial Services, Senator Ian Gorst, has welcomed the publication of a Statement by the OECD Inclusive Framework on the building blocks for a new global tax framework. 130 out of 139 member jurisdictions of the Inclusive Framework, including Jersey, have agreed the Statement as of 1 July 2021.
This announcement is an important stepping-stone in the OECD process to agree new rules for the taxation of the world’s largest multi-national companies. It has taken two years of detailed discussions and negotiations to arrive at this point and further work is required before a final agreement is reached.
Senator Gorst said: “The Government of Jersey has participated fully at every stage of these discussions, to represent the interests of the Island, our economy and our international finance centre. Officials from across Government departments will continue to prioritise this work in the important months that lie ahead, and continue to coordinate with Guernsey and the Isle of Man.
“As a member of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS), Jersey continues to play a full and active role in the OECD discussions on develop proposals for international tax reform.”
The OECD proposals are targeted and limited in scope, focussing on the world’s largest companies:
- Pillar One of the package would create new profit allocation rules for the world’s largest 100 global multi-national companies, excluding regulated financial services. For that small targeted group, certain of their profits would be re-allocated to the jurisdictions of their markets and customers;
- Pillar Two would introduce a new framework of taxation where companies falling within the scope of the Pillar Two tax 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 the OECD statement is “at least 15%”. However, it will likely be many more months of negotiation and discussion before the final rate is agreed.
The proposals also recognise that funds should not be in scope of Pillar 2 and there is an exclusion for regulated financial services from Pillar 1. Investment funds that are ultimate parent entities of a Multi-National Company Group or any holding vehicles used by such entities, organisations or funds will not be subject to the Pillar Two rules.
Senator Gorst added: “The Government of Jersey has always maintained that international tax standards should be developed on a global basis by organisations such as the OECD, rather than on a regional basis, as this helps protect the principle of maintaining a level playing field among tax jurisdictions globally. This is critical to ensuring that the interests of small countries are balanced with those of larger countries.
“Jersey’s corporate tax system has been carefully designed to meet the Island’s ongoing fiscal needs and to align with international standards. This means that Jersey’s corporate tax system is designed to support the requirements of a geographically small economy that is open and attractive to global investment.
“Jersey is well placed to continue to adapt to international tax standards, and we will continue to engage in a proactive way with the OECD, EU and global bodies to combat aggressive tax avoidance and profit shifting. 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.”
The agreement from this OECD Inclusive Framework meeting will be sent for political endorsement to the G20 meeting of Finance Ministers in Venice on 9th - 10th July 2021.
Government of Jersey News Release.