Island’s tax regime not harmful to global economy, says OECD
GUERNSEY’S tax regime is not harmful to the global economy, an international body has ruled.
The Organisation for Economic Co-operation and Development’s conclusion follows a similar assessment from Europe.
It reviewed 12 jurisdictions that have no or low rates of corporate taxation, which included Guernsey, Jersey and the Isle of Man.
This concluded that Guernsey’s taxation regime is not harmful when reviewed against the OECD’s standards concerning the requirement for legal persons to have sufficient economic substance.
This corresponds with a similar decision by the European Council of Finance Ministers in March 2019.
‘In March, we welcomed the ECOFIN decision that Guernsey meets the EU regional standard in respect of taxation following the implementation of a legal substance requirement from the 2019 tax year,’ said Policy & Resources president Gavin St Pier.
‘That implementation work has also ensured that we meet the OECD’s global standard on fair taxation.
‘The affirmation that our tax regime is not harmful in the global economy is an important decision to help challenge misconceptions about Guernsey. Guernsey has a long track record as a transparent and cooperative jurisdiction that meets international standards as they emerge.
‘The maintenance of this track record remains one of the priorities in the Island’s Future Guernsey Plan.
‘The OECD’s review published this week provides further independent confirmation of this. It will be no surprise to anyone who has knowledge of Guernsey’s exemplary standards in this field.’
The OECD review tested jurisdictions against its standards relating to economic substance, which were published in 2018.
The findings published on 23 July acknowledge that the economic substance regime adopted by Guernsey last year and implemented from the start of this year creates a sufficient legislative framework to ensure it is not considered to be a harmful regime.
In 2017, the EU’s Code of Conduct Group for Business Taxation decided to review the cooperation status of third countries to the EU on tax matters.
During 2018, Guernsey worked with the EU to design and implement a legal substance requirement within its taxation regime with effect from 1 January 2019.
The legislative changes were reviewed by the EU in early 2019. ECOFIN decided that Guernsey was a cooperative regime on 12 March.
Economic substance requirements aim to ensure that entities only make profits which properly reflect the number of people, premises and expenditure they have.