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Legislation for "the most significant tax reform in recent years" is to be debated in October, Ministers have confirmed, amid concerns about the time to ensure the proposals are properly scrutinised.
OECD Pillar Two reforms come from an international framework that Jersey has signed up to, which will require large multinational companies to pay a 15% minimum effective tax rate.
Deputy Jonathan Renouf, who chairs the OECD Pillar 2 Implementation Sub-Panel, asked Treasury Minister Elaine Millar at the start of the month when the proposals to change the law would be lodged.
In a letter to the Minister, he explained that his panel understood at the time that the proposition should be debated at the first States sitting, but they felt this timeline seemed "exceptionally ambitious".
He added that this will represent "the most significant tax reform in recent years" and that the schedule that was proposed at the time would not allow enough time to properly scrutinise and consider the proposals.
Jersey is under some time pressure to implement the reform and Deputy Renouf reinforced that there is a deadline for it to come into force.
Deputy Millar and External Relations Minister Ian Gorst replied, saying that timelines "would always be concise" and that they had a "firm aim" to lodge the legislation imminently for debate it in the States Assembly in the sitting beginning on 1 October.
The Pillar Two reforms revolve around a 15% 'minimum tax' for multinational corporations - which have facilities and assets in one or several countries other than their home base. The measures are targeted at the world's largest companies.
Jersey is one of jurisdictions that joined the consensus on the revised framework, along with the other Crown Dependencies.
The island has been able to attract business over many years by keeping its corporate tax rate at 0%, with financial services businesses taxed 10%. This is known as the 'zero-ten' regime.
Each of the signing jurisdictions has committed to a ‘Two Pillar’ plan.
‘Pillar One’ would create new profit allocation rules for the world’s largest 100 global multi-national companies, who might have to re-allocate some to the jurisdictions of their markets and customers. All regulated financial services are excluded from this.
'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 on their global profits, calculated on a country-by country basis. This does not include funds.
The level of the minimum rate is of "at least 15%".
Deputies Millar and Gorst said in their response that Pillar 2 legislation was only expected to affect very few organisations in Jersey - only those with global annual revenues higher than €750 million - and that the text of Jersey's legislation would in large parts follow a model text produced by the OECD.
Businesses below the €750 million threshold won't be affected.
"The introduction of Pillar 2 legislation is by no means the end of the journey," the two Ministers added.
"We hope to work with your sub-Panel constructively on issues such as maintaining a globally competitive business environment as we align with evolving international tax standards and providing our global investors with administrative simplicity and excellent customer service, underpinned by use of technology."
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