Islands pledge to work together on global minimum tax plan

Tuesday 21 May 2024

Ministers from Jersey and the other Crown Dependencies have underlined their commitment to adopt new global tax rules with effect from next January.

Following joint talks between Treasury Minister Elaine Millar, External Relations Minister Ian Gorst and counterparts from Guernsey and the Isle of Man, the three jurisdictions confirmed they are aiming to bring in the new 'Pillar Two' framework.

Set up by the Organisation for Economic Co-operation and Development, the framework introduces a new global corporate tax rate designed to ensure that large multinational enterprises pay a minimum 15% effective rate of tax in each jurisdiction in which they operate.

Pillar Two is designed to avoid a “race to the bottom” triggered by multinational enterprises changing their operations to reduce the amount of tax they have to pay and by jurisdictions offering incentives to attract businesses to their shores.

Pictured: External Relations Minister Ian Gorst took part in the talks with other Crown Dependencies.

According to OECD figures, this has seen the overall average statutory rate of corporate income tax decline from 30.8% in 2000 to 23.1% in 2020.

Others taking part in the recent talks, which were held remotely, were Chief Minister Lyndon Trott and External Relations Minister Jonathan Le Tocq from Guernsey, as well as Isle of Man Treasury Minister Dr Alex Allinson.

Deputy Trott said earlier this year that the new arrangements could be a "game-changer" for the three jurisdictions.

In a short statement issued after the talks, the three jurisdictions confirmed their "shared commitment to international tax standards and the continued value of inter-island cooperation in areas of mutual interest in international tax policy".

The statement continued: "Each island noted they would shortly be commencing their respective legislative procedures to a common timeline with introduction for accounting periods commencing on or after 1 January 2025.

"The Ministers agreed that working co-operatively and openly with each other on topics of mutual interest benefits all three islands and should continue."

It is believed that the number of affected business in Jersey is in the "high hundreds", with the majority of business falling below the threshold of 750,000 Euros.