Corporate tax revamp not an issue as long as it is global

Paul Hodgson, chairman of the Guernsey International Business Association, said such global change would not be a problem for the island amid reports that the G7 group of rich nations is on the verge of striking a deal on the issue. Guernsey currently has a zero corporate tax regime with a number of exceptions.

‘The most important thing about it is that it is proposed to be a global regime and doesn’t become a problem for us because there is no alternative that is lower than us,’ said Mr Hodgson.

‘So, we will play our part in the implementation of any global regime and clearly anyone who steps out of that will face sanctions and blacklists.’

Guernsey would follow the same path as similar jurisdictions in any potential implementation. But the Giba chairman noted implementing a new global regime could be complicated and time-consuming. Working out what a minimum rate actually meant would be another issue, he said.

He spoke after the Reuters news agency reported the contents of a draft G7 communique talking about an ‘ambitious’ deal on global tax changes ahead of officials meeting in London tomorrow and on Saturday.

Reuters reported the contents of a draft communique in relation to tax as saying: ‘We commit to reaching an equitable solution on the allocation of taxing rights and to a high level of ambition on the rate for a global minimum tax.’

No precise numbers were mentioned, but the United States has proposed a minimum 15% rate. European Union chiefs have also backed a minimum level and have talked about incentivising third countries to sign up to any changes or risk going on a tax blacklist.

The Organisation for Economic Co-operation and Development is currently undertaking work to reach a deal on overhauling the international tax system, with the objective of reaching a deal by mid-2021.

The objective is to stop companies shifting profits from where they are made to low-tax jurisdictions.

Such changes could also be seen as a way to raise money to refill public finances hit by massive spending by governments around the world during the pandemic to support their economies.

The Treasury lead on the Policy & Resources committee, Deputy Mark Helyar, has said Guernsey supports ‘the objective of reaching agreement on a worldwide approach, and a level playing field, which will help avoid the complexities of unilateral action by countries’.