Deal ‘disruptive but manageable’
A GLOBAL tax deal will have a ‘disruptive but manageable’ impact on international finance centres, according to a senior member of the Channel Islands finance industry.
Geoff Cook, who holds a number of positions within financial services businesses, said the OECD inclusive framework had brokered a deal that included all but four of its 140 members.
‘Companies with more than 20bn euros in revenues and a profit margin above 10% will see a portion of their profits taxed in jurisdictions where they have sales – 25% of profits above a 10% margin may be taxed,’ said Mr Cook, a former chief executive officer at industry agency Jersey Finance.
‘After a review period of seven years, the 20bn euros threshold may fall to 10bn euros. Companies in the extractives sector – like oil, gas, and other mining companies – and financial services companies are excluded.’
Additionally, Mr Cook said the agreement set up the adoption of a global minimum business tax of 15%, which would increase taxes on companies with more than 750m. euros of revenues on their earnings in low-tax jurisdictions.
‘It doesn’t require all countries to have a minimum corporation tax of 15%.
‘The net effect is that large companies would pay more taxes in countries where they have customers and a bit less in countries where their headquarters, employees and operations are. The impact on IFCs is likely to be disruptive but manageable.’
Guernsey currently has a standard rate of 0% tax applied to most companies tax resident here. But income arising from certain activities is taxed at 10% or 20%.
Guernsey’s government has said it was continuing to work closely with the OECD on international tax matters – taking part at every stage of discussions – to represent the Bailiwick’s interests.
Deputy Mark Helyar, treasury lead on the Policy & Resources Committee, has said Guernsey backed a deal on a worldwide approach and ‘level playing field’ to avoid the complexities of unilateral action by countries. He also said Guernsey would co-ordinate with Jersey and the Isle of Man.
