Former Treasury minister frustrated as islands align on 15% tax on big companies

The three Crown Dependencies issued a joint statement regarding their approach to Pillar Two – an agreement made by 137 jurisdictions to establish the framework for a global 15% minimum tax rate for large multinational groups.

Policy & Resources vice-president Deputy Mark Helyar said Guernsey had consistently championed the need for a level playing field in tax co-operation.

‘As the rest of the world is looking at how to respond to the OECD’s global initiative to establish a globally applied minimum effective rate for corporate tax, it is significant that Guernsey, Jersey and the Isle of Man are in lock step about the approach to implementation,’ he said.

‘We will continue to work together as it becomes clear about how the rest of the world will act on pillar two.’

Fitzroy Tax director Graham Parrott believed the new rules would apply to about half a dozen companies in Guernsey.

‘Its not the end of the zero-10, but potentially it ends it for large multinationals,’ he said.

‘It shows that Guernsey is respecting the OECD rules, so that an “effective” 15% rate is applied across the group. It shouldn’t affect our competitive position as this rate is being applied in other countries.’

Mr Parrott said the application of the Pillar Two could become complicated.

‘It is about how and where the 15% tax rate is applied and paid,’ he said.

‘That tax can be paid in the home country or where the subsidiary is based. If these multinationals subsidiaries have to pay 15% somewhere, then they may as well pay it here. It means the island will then make more tax revenue, but I don’t think it will be enough to address the island’s deficit.’

The 15% tax rate will be introduced in 2025 and apply to multinational groups with an annual turnover above 750m. euros.

Former Treasury minister Charles Parkinson, who championed introducing a corporate tax during the recent tax debates, welcomed the introduction of the 15% rate but said it did not go far enough.

‘It’s a step in the right direction, but it’s not enough,’ he said.

‘There is no reason why all companies working here shouldn’t be paying tax. I don’t understand why P&R need to be dragged kicking and screaming into corporate tax revision.’

He thought that this change could also introduce further implications for more than just the handful of local operations expected to be caught.

‘For example, about half the FTSE 100 have their captive insurance companies here, and who knows what else.’

Deputy Parkinson said that in the last tax debate P&R had said some £20m. could be raised annually from corporate tax, but that it was unclear what was included in this calculation.

He was sure that no companies would be looking to leave the Bailiwick to avoid the implementation of the new tax.

‘Where would they go? This is a global minimum tax rate,’ he said.

‘I’m frustrated as this is something we should have done years ago, instead it has been forced on us. We seem to want to be seen to be the last in line to do anything, which I simply don’t understand.’