The latest edition of the "Taxing Times" roundtable discussion, hosted by BVI Finance, concluded that implementing the Global Minimum Tax (GMT) will not be a one-size-fits-all solution, and individual countries will need to conduct thorough jurisdictional assessments.
The virtual event that took place on July 26, was moderated by Oliver Cooper, Policy Lead at Charles Russell Speechlys LLP and Counsel to the IFC Forum, who facilitated the panel comprised of renowned tax and finance experts. The panelists included Pascal Saint-Amans, Partner at Paris-Brunswick and the Former Tax Policy Director at OECD; Mindy Herzfeld, Counsel at Potomac Law and Tax Professor at the University of Florida; Geoff Cook, Chairman of Mourant Consulting and Chair of the STEP Global Public Policy Committee; and Kayla Laidlaw, Tax Advisory Director at Deloitte BVI. The panel provided deep insights into the multifaceted aspects of the GMT, covering its potential impact on multinational corporations, developing countries, and countries that have no or low corporate tax rates.
The consensus among the panelists was clear: the path towards implementing the GMT is fraught with complexity and potential roadblocks. Each country, they argued, will need to assess the consequences of implementing or not implementing the tax on their specific economies, considering local contexts and existing financial infrastructures.
A case in point discussed was the British Virgin Islands (BVI), an internationally recognised international financial centre (IFC). The panel emphasized that for jurisdictions like the BVI, a detailed jurisdictional assessment is necessary to evaluate the economic implications and strategic ramifications of the GMT.
The panelists also agreed that while the GMT aims to curtail harmful tax practices and ensure corporations pay their fair share, the actual implementation will likely vary across different jurisdictions due to the unique economic and political landscapes.
Status of Implementation
Discussions were opened with Pascal Saint-Amans, who confirmed that a critical mass of countries, have effectively embraced the 15 percent global minimum tax. This widespread adoption ensures that the tax will have a significant impact on global taxation.
While some countries, have already expressed their intention to implement Pillar Two and are currently in the process of doing so, other countries have not immediately shown interest. Some low-tax jurisdictions have also taken notable steps to comply with the new regulations.
Impact and Challenges
Estimates by the International Monetary Fund (IMF) are that the successful implementation of Pillar Two is projected to generate more than €200 billion in additional revenue annually. However, challenges remain concerning revenue distribution due to carve-outs, subsidies, and qualified tax credits.
The US Stance
It was highlighted that, contrary to popular belief, the USA is not obstructing the GMT adoption, as it already has its version known as the Global Intangible Low-Taxed Income or GILTI tax. Professor Herzfeld added that the political landscape in the United States, on the GMT is complex and nuanced. Herzfeld, who last week testified before the US Ways and Means Committee of the House of Representatives says there is a lot of modelling on the impacts of the GMT, which she urged people to review.
Monitoring Implementation and Collaboration
The discussions also delved into how the OECD would monitor the implementation of Pillar Two. While 138 countries approved the outcome statement, there are uncertainties about whether they will fully adopt an Internal Rate of Return (IRR) and domestic tax.
The panellists emphasised the importance of careful consideration for jurisdictions like the BVI, when assessing their business models and aligning with international standards.
While it may seem tempting for some jurisdictions to rely heavily on China or Latin American investments, the panelists advised against placing all their eggs in one basket. Instead, they stressed the significance of continuing to rely on EU and US investments while paying close attention to the development of global minimum tax rules.
Developing countries that offer tax incentives also face pivotal decisions regarding compliance and attracting foreign investments. To adapt to the evolving tax landscape, all stakeholders must carefully consider the implications of Pillar Two on their economies and business environments.
Particularly, for the BVI assessing the current business landscape is critical. "There is a common misconception that there are very few BVI incorporated companies meeting the Pillar Two threshold. However, data reveals that numerous such companies exist and contribute to the BVI's economic landscape", said Laidlaw.
“While these companies may not be widely recognised names in the media, they play a significant role in the jurisdiction's financial ecosystem. As the BVI government and businesses evaluate the potential impact of Pillar Two implementation, understanding the current structures is essential,” said Laidlaw.
Geoff Cook explained, “It goes way beyond tax, and it really requires governments in each jurisdiction to come up with a wide strategy regarding long-term revenue generation and the overall strategic direction of each jurisdiction. The fact that it is not mandatory gives us a bit of flexibility and room to make sure that the analysis is done completely.”
The discussions emphasised the importance of striking a balance between immediate considerations and long-term strategies. Ultimately, making well-informed decisions that align with the jurisdiction's economic interests and international tax standards is paramount. A thoughtful approach to tax policy will be instrumental in maintaining a stable and thriving business environment in the BVI.
In conclusion, the discussions in the "Taxing Times on Roundtable Discussion” highlighted the complexity and significance of implementing the global minimum tax Pillar Two. As jurisdictions worldwide navigate through the challenges posed by this tax reform, careful assessment, collaboration, and proactive engagement will play pivotal roles in shaping the future of global taxation and supporting the growth of international financial centres like the BVI.
-END-
For further information please contact:
Adrianna Soverall
Marketing and Media Relations Coordinator
asoverall@bvifinance.vg |Tel: 284-852-1957