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While Jersey officials are remaining tight-lipped on the potential benefit new global company tax rules will bring to the public purse, Guernsey's Chief Minister says the island is expecting to get an extra £30m which could be a "game-changer" for pushing forward big projects.
The global minimum tax rules initiated by the Organisation for Economic Co-operation and Development were brought into force on 1 January in the UK and the European Union, with pledges by Jersey and the other Crown Dependencies to implement the rules in 2025.
The global minimum tax, originally agreed in principle by more than 140 countries in 2021 and known as the 'OECD Pillar 2 initiative', is designed to stop a decades-long downward spiral in headline corporate tax rates worldwide.
Profits of hundreds of Jersey-based companies forming part of multinationals with a turnover of more than €750m a year will be taxed at 15% from 2025 as part of an international deal.
A recently-published OECD paper estimated that "investment hubs" like Jersey and Guernsey would have the largest expected gains from the reforms, with corporate income tax revenues rising by up to a third.
Jersey's government has so far declined to provide an estimate of how much local coffers will benefit.
But Guernsey is expecting at least £30m – having very recently upped its estimate by £20m.
The charges are expected to hit most regulated banks and a large amount of international insurance activity, such a captive insurance, based in Guernsey, which are currently taxed at 10% and 0% respectively.
Guernsey's new Chief Minister, Deputy Lyndon Trott, told Express the predictions so far were "conservative", adding: “We think the numbers may be even higher."
He went on to describe the change as “a game changer” for funding major building projects this term.
Pictured: Treasury Minister Ian Gorst, who is leading work on the OECD initiative, has not shared an estimate of revenue from the global tax rules.
But he added: "It doesn't change the fact that long-term we still need solutions to make public finances sustainable, but it does allow us to be a bit bolder in investing in our community now, and we should do that."
Along with his colleagues on the island's leading Policy and Resources Committee, Deputy Trott accepted that the new global tax rules may bring economic risks to Guernsey and that there remained "uncertainty" over what the final proposals look like, which could lead to some businesses choosing to relocate.
"How much additional revenue is dependent not only on how the legislation is applied in Guernsey, but also how it is applied in countries where entities in Guernsey might also face tax, or in jurisdictions where business might relocate if they feel there is an advantage in doing so.
"There is much technical work still to do to finalise how this global initiative will work in practice, as such the proposals for implementation of the minimum tax in Guernsey have yet to be finalised. Once there is clearer visibility of the global position later in 2024, the proposals can be finalised and presented to the States Assembly for debate in the normal way."
Pictured: Guernsey's new Chief Minister, Lyndon Trott.
But Deputy Trott said the Bailiwick had no choice but to implement and execute the new tax system effectively.
“These are international measures and if we wish to remain compliant and cooperative, we need to - for once it's to our benefit.
“It’s a great bit of news and it's a further indictment I think about the strength of our economy, that there is no expectation that there will be any behaviours that could impact those predictions negatively.”
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