Global corporate income tax of 15%? Small island states under pressure by OECD!
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For example, the powerful Organization for Economic Co-operation and Development (OECD), whose 135 members are dominated by Europe, agreed in 2021, on a two-pillar solution to reform international tax rules to ensure that multinational corporations pay a minimum level of corporate income tax.
The OECD which includes the United Kingdom, the USA, France, Luxembourg, Germany, Spain, Denmark, Switzerland, Canada, Japan and Portugal to name a few, are countries that sometimes do not play by their own rules.
The OECD has also demanded that by 2024, there must be a 15% Global Minimum Tax. Small Island states in the Caribbean region for example, the Commonwealth of The Bahamas and Bermuda which both had no income tax have signaled their willingness to comply with the OECD demands.
This will result in increased pressure on the other small regional International Financial Centers like the VI to comply, or face blacklisting and coordinated sanctions ultimately making them less attractive and less competitive.
As a part of the bullying regime of small island states, the OECD will treat as suspect, any business in blacklisted countries.
Bermuda first announced
Earlier this week, the overseas Territory of Bermuda announced that it is considering a corporate income tax. According to the Royal Gazette newspaper, the Government of Bermuda is moving towards the implementation of corporate income tax in “what would be the biggest shake-up of the island’s tax system since the 1800s.”
The same paper quoted the Premier of Bermuda, E. David Burt as saying, “Therefore, in response to the substantial changes in the global tax landscape, the Government is considering the implementation of a new corporate income tax regime as part of its work to address the Pillar 2 requirements agreed by the Inclusive Framework.”
However, to date, the VI has yet to announce or make public its strategic response to this 15% Global tax initiative imposed by the OECD according to many familiar with the sector.
It must be noted, that the VI never abolished its income tax regime; it zero-rated it. A few years ago the European Union (EU) found the VI, unlike The Bahamas and the other Overseas Territories in non-compliance of an earlier tax initiative because of ring-fencing.
Ring-fencing means that a jurisdiction will have to do what it agreed to without finding loopholes for non-compliance. So in other words, a company may ring-fence its pension fund to protect it from being used for other business expenditures.
The VI has a complicated history with this matter. For example, local companies used to be liable for income tax of around 12% on profits under Cap .285, while our International Business Companies (IBC) were exempt from taxes by law under the IBC Act (in our jurisdiction ring-fencing). However, in 2004, the Government of the day brought all companies under one regime - the BVI Business Companies, where no BVI companies were assessed a corporate tax. In order to also bring equity to individuals, the Government of the day amended the P.A.Y.E income tax structure. They decided not to abolish income tax but to charge a 0% rate, thus placing local companies, IBCs and individuals on the same footing and bringing the Territory into compliance with the EU initiative.
VI is not a tax haven- Julian Willock
Many other groups and parliamentarians in the UK and the USA who believe the small island states are used as tax havens have also supported many initiatives for tax harmonization over the years.
The UN Secretary-General Antonio Manuel de Oliveira Guterres has thrown his support behind countries and groups by lobbying for global tax laws to be overhauled to prevent wealthy people from sheltering their wealth in tax jurisdictions and avoiding taxes in their home countries.
Mr Julian Willock, a former Permanent Secretary and former Speaker of the House of Assembly (HoA) in the VI who often speaks on the local financial services sector in an invited comment said, “The VI is not a tax haven and has never been. In fact, we often set the standards for international compliance in this sector.”
Last month speaking on a radio station interview in Grenada, Mr Willock commended the Virgin Islands Party Government for the new Ministry of Financial Services “to pay more focused attention to the sector.”
Mr Willock became known for an interview in 2016 with the BBC where he vigorously defended the financial services jurisdiction from the narrative of the Territory being a tax haven.
Our news center reached out to the Deputy Premier and Minister for Financial Services, Labour and Trade, Hon Lorna G. Smith OBE (AL), for details on what is the BVI's response to the 15% global tax initiative imposed by the OECD, however, no response was received up to publication time.
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20 Responses to “Global corporate income tax of 15%? Small island states under pressure by OECD!”
Only now they will talk about treating us as equal when they lost control.
How will we feel when our taxes are used to buy weapons to kill innocent minority kids in “righteous strikes” half way across the world.
Here's my feedback and suggestions for the Corporate Tax...
1. Do as you are told, for once!! It’s not like you have much choices
a) to repair what we have now in this sector and
b) what we can be.
With the departures of Robert and Jenifer hope is a thing of the past
BVI should not fall for this.
Over the years the difference is that the VIP under Stoutt and Ralph were able to implement the solutions. In most times in our history when problems weren’t existential, the plans of each party mattered. Now all parties have the same plans for the big issues and so all that really matters is who will be able to execute.
I am still placing my wager on the lady in we corner.
If you put in a tax they will leave with they money!
Don’t count yo chicken before hatch! We lucky to have what we got.
Now we just need to get the politicians hand out of the cookie jar. FOCUS Fix roads, hospitals and schools