‘Nothing to fear from tax changes’
GUERNSEY has nothing to fear from a more ‘level playing field’ after the G7 backed an international tax overhaul – but it is too early to tell what it could mean for the island’s zero-10 regime.
Local politicians and experts offered their views after the G7 group of wealthy nations, which includes the UK and US, backed steps to ensure large multinationals, such as tech giants, pay taxes in the countries where they operate and not only where they have headquarters plus a minimum 15% corporation tax rate.
The G7 deal has raised the prospect that a new global tax framework, recognising the digitalisation of the world economy, being developed by the Organisation for Economic Co-operation and Development could be agreed next.
Mark Helyar, Treasury lead for Policy & Resources, said the island was working closely with the OECD on international tax matters – including a proposal that large multinationals pay a minimum effective rate of tax on profits.
‘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,’ he said. ‘The OECD have committed to reach agreement by July of this year following years of negotiations, in which Guernsey has taken part.
‘The recent move by the G7 finance ministers to agree some principles related to this initiative, including a minimum effective rate of corporate tax of at least 15% for large global companies, is an important stepping stone to try to encourage international consensus on the OECD initiative next month.’
Recent European Commission activity in this area highlighted the importance of reaching an agreement in the OECD and in the wider G20 group of nations. Guernsey continued to engage with the EU on international tax matters as well.
Deputy Helyar stressed Guernsey had a long track record of adapting to meet new international tax standards. It had also been repeatedly recognised by the EU as having a non-harmful tax regime and as being a cooperative jurisdiction with respect to tax good governance.
Gavin St Pier, a former president of Policy & Resources, said the devil would be in the detail.
‘It’s aimed at this stage principally at large multinationals, so it’s difficult to know whether it’s the end or just the beginning of the end for the zero-10 corporate regime we’ve had since 2008,’ he added.
The island has a general zero corporate tax with a number of exceptions.
‘Guernsey should have nothing to fear from a genuine level playing field. Let’s hope that’s what emerges from the detail,’ added Deputy St Pier.
On the face of, Guernsey could also get its ‘fair share’ of corporate tax from Google, Netflix and Amazon based on those companies’ sales here.
Chris Anderson, a local partner at law firm Carey Olsen, said it was too soon to know what effect there might be on the zero-10 regime.
‘As far as Guernsey is concerned, most of the business we see in the island is no longer driven by our corporate tax rate,’ he added.
Guernsey was also fleet of foot so could make the most of new opportunities, while facing any challenges. Competitors were in the same boat if the minimum 15% corporate tax rate went ahead, he added.
Leading tax lawyer James Quarmby said it was important to see how the OECD progressed matters and whether the EU used any new standards within its tax blacklisting criteria. But Guernsey was able to adapt and was recognised as a skilled finance centre – and that would remain.
UK officials said the minimum 15% corporation tax rate would create a ‘more level playing field for UK firms and cracking down on tax avoidance’.
