Chief Minister hits out at President over global tax reform demands

Monday 17 May 2021

The President of the United States should look “closer to home” before demanding global tax reforms, the Chief Minister has retorted after the US leader put forward suggestions that could impact Jersey.

The island has been able to attract business over many years by keeping its corporate tax rate at 0% - but that advantage could be weakened if the President gets his way.

The US administration wants to see a 21% minimum rate to stop companies from shifting their profits to so-called ‘tax havens’ and other low tax jurisdictions. 

It means that, if a company from the US or any other country was based in Jersey for the tax advantage, for example, the home country would be able to ‘top up’ the tax they pay in their own jurisdiction to make it reach the global minimum. 

Particularly targeting companies like Amazon, Apple, Facebook and Google, the White House believes that such a move would stop what’s known as ‘base erosion and profit shifting’ – countries losing money because of multinational companies shifting their profits to lower-tax jurisdictions. In 2017, the island was tarred with the 'tax haven' brush when it emerged in the Paradise Papers that Apple moved offshore funds to Jersey after a crackdown on tax laws in Ireland.

Jersey’s Chief Minister, Senator John Le Fondré, did not appear to support the President's suggestion of a global minimum tax rate when it was put to him by the i newspaper. 

Pictured: Apple - which was reported in 2017 to have once settled on Jersey after shopping around for a new low-tax home to stash their profits - is one of the companies in the US President's sights.

He said Joe Biden ought to look “closer to home” and consider the practices perpetuated by his tax-friendly home state of Delaware. There, ‘intangible assets’, such as patents or trademarks, for example, are not taxed.

According to the newspaper, he went on to point out that Jersey contributes £15bn to the economy each year, and supports a quarter of a million UK jobs.

Finance makes up more than a third of Jersey’s economy, with a value of more than a £1bn. 

The White House officially put its proposals forward to the 135 member nations of the OECD (Organisation for Economic Cooperation and Development) in April. Talks over the proposals are continuing, and the issue is also expected to surface during the meeting of G7 Finance Ministers next month. 

UK Chancellor Rishi Sunak, who Chairs the G7 Ministers, is reported to have withheld his support for the President's proposals so far. He will only consider the move towards a 21% global minimum tax rate as part of a “broader package”, according to the FT.  

When Express asked for the Government's official position on whether it would be supporting President Biden's proposals, a spokesperson replied: "The Government of Jersey is a strong supporter of international tax standards, including those set by the OECD.

"The OECD is currently developing proposals for a common, global approach to ensuring that large multinational enterprises pay an appropriate level of tax on cross-border profits. Jersey officials have been involved throughout the OECD process in the past two years and continue to engage on a regular basis.  These discussions are complex, and ongoing, and certain key aspects of the policy architecture are yet to be decided.

"Jersey will continue to work with international partners, including the US, the EU and its Member States, to find global solutions to harmful tax practices, while encouraging healthy and fair tax competition."

Pictured: UK Chancellor Rishi Sunak hasn't yet thrown his full weight behind the global tax reform proposals.

They added that the Government "believes there should be a level playing field for international tax standards and that all jurisdictions should be committed to meeting those standards, including the prevention of base erosion and profit shifting (BEPS)", going on to say: "Jersey has a long track record of being an early adopter of international tax standards. In December 2017 the Island was the third jurisdiction in the world to have completed its domestic ratification for the OECD’s Multilateral Instrument on BEPS.

"Jersey will continue to maintain its longstanding position as a transparent, well-regulated and cooperative jurisdiction that is committed to global tax standards."

The response was signed off by the Chief Minister and External Relations Minister.

According to i, a US Treasury spokesperson responded to the Chief Minister's comments: “Today, international tax architecture isn’t well suited to a global economy and the Biden-Harris Administration believes it is imperative to work with other countries to end the pressures of tax competition and corporate tax base erosion. 

“A global minimum tax would make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity, while improving fairness for middle class and working people."