G7 agrees to new global tax standard

Monday 07 June 2021

A group of the world’s richest nations have agreed in principle to a new global tax standard that will usher in the end of Guernsey's 'Zero Ten' regime.

Since 2008, the island has been able to attract business by keeping its corporate tax rate on profits at 0%, while financial services institutions have paid 10%.

Following calls by the US Administration for a new international standard to stop companies from shifting their profits to so-called ‘tax havens’, the G7 Group agreed a global minimum tax rate of 15%.

It is targeted primarily at multi-national tech giants such as Amazon, Apple, Facebook and Google. The full effects of this are yet to be seen, with the tax reforms expected to take years to come to fruition. 

Pictured: The G7 is a group made up of the world's richest nations. 

Deputy Mark Helyar, Treasury lead for the Policy & Resources Committee, described the decision as an "important stepping stone" towards an international consensus.

“Guernsey works closely with the OECD on these international tax matters including the original BEPS initiative, the Forum on Harmful Tax Practices as well as the more recent OECD commitment to address the challenges from digitalisation of the economy, which includes a proposal that large multinational enterprises should pay a minimum effective rate of tax on its 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."

"Guernsey has a long track record of adapting to meet new international tax standards"

The OECD has committed to reach agreement by July following years of negotiations, which Deputy Helyar said Guernsey has engaged fully in.

"The recent move by the G7 Finance ministers to agree some principles related 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.”

Deputy Helyar said the island has proved capable of adapting to international changes and will continue to do so to ensure competitiveness. "Guernsey has a long track record of adapting to meet new international tax standards," he said.

"Guernsey’s tax regime was assessed as being non-harmful against the criteria of the Code of Conduct in 2013.  In 2019 the EU reaffirmed its previous assessment that Guernsey is a cooperative jurisdiction with respect to tax good governance following the implementation of new substance requirements.

"Guernsey continues to engage with the OECD and EU on international tax matters.”

Pictured top: UK Chancellor Rishi Sunak announced the agreement at the weekend, saying: "these seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer – creating a fairer tax system fit for the 21st century."