Over in Europe, Jersey, a Crown Dependency that has UK links but its own legal and political system, also weighed in.
“The reality is that these proposals have been ongoing for months - years in fact - in an attempt to try and tackle large multinational profit shifting, and ensure that, in particular, the big global tech companies pay tax in the places where they do business,” Joe Moynihan, CEO at Jersey Finance, said in a note.
“It was always the expectation that the OECD would take the lead and make representations in summer this year,” Moynihan said. “With the G7 having now agreed a number of measures and a way forward, the next step will be for the measures to be agreed by the G20 to gain widespread international approval. Again, that will be no mean feat, but we can anticipate progress on that later this year.”
He said aspects of the proposals are “encouraging.”
“The proposals are aimed squarely at tackling large multinational companies, particularly large tech companies, which are not a significant feature of Jersey’s business model,” he continued.
“Of course, multilateral changes to the global corporate tax environment will not be without their challenges. These proposed changes have the potential to impact all countries, and it is absolutely our belief as a jurisdiction that any reforms must be implemented on a level playing field, balancing the interests of small jurisdictions as well as larger ones; developed as well as developing countries,” he said.
The global tax environment is hugely challenging and this is a once-in-a-generation opportunity to provide some robust, sensible solutions to improve the international tax landscape and provide consensus and certainty - but it must be done right, consistently and with full agreement at international level,” he said.
Jersey's government appears to be unhappy about the minimum tax rate pact.
Jersey's chief minister John Le Fondré recently told President Biden that the latter should ‘look closer to home’ and pointed to low-tax regimes in states such as Nevada, Wyoming and Mr Biden’s home state of Delaware.
The EU parliament passed a resolution earlier in 2020 calling for jurisdictions with zero-rate corporation tax to be blacklisted..
Jersey has a "zero-ten" corporate tax code. The zero-ten system was introduced in Jersey in 2009 after the European Union Code of Conduct Group said that the island’s previous exempt-company-status regime was unfair. (Under that system foreign-registered companies were not taxed as long as they paid an annual fee.)
Today, resident companies in Jersey are generally taxed on worldwide income. A permanent establishment, such as a branch of a company, is taxed on profits attributable to the permament establishment. Non-resident companies are taxable on Jersey real estate income. Companies are liable to income tax at a rate of zero, 10 per cent, or 20 per cent on taxable income. The general rate applicable is zero, while the 10 per cent and 20 per cent rates apply to certain companies/income streams.
In the Isle of Man - another Crown Dependency - the general corporate tax rate is zero.
Corporate tax rates have fallen steadily over recent decades, as countries have competed to attract inward investment. This is sometimes branded as a "race to the bottom", even prompting calls to scrap corporate taxes completely and tax individual beneficial owners of companies instead.
Source: Tax Foundation.
(Editor's note: Sometimes the idea of countries setting minimum tax rate agreements is dubbed as a tax "cartel" because the argument is made that decisions about rates should ultimately rest with legislators in specific nations, that such "cartels" are self-serving and induce complacency, and because offshore centers create a safety valve when major countries go down a high-tax, high-spend path (as appears to be the case now). These may be sound arguments, but they are particularly difficult to make when emotions run high about corporations, such as the "Big Techs," finangling the patchwork of global tax regimes, and when the pandemic has ravaged public coffers. In the medium term, as we know from accords among oil producers (OPEC), such "cartels" can be hard to maintain because a producer/country will have an incentive to defect. Much depends on how low corporate taxes are. If they were to rise back into the high 20s, or 30s or more, then offshore centers would be under big competitive pressure to defy received wisdom. In the meantime, these are nervous times for the offshore world. A final irony is that one of the arguments for Brexit was for the UK to be able to restore sovereignty over its tax policy.)