It is up to the next gov to decide how the island responds to the newly agreed 15% global corporation tax, but we are well placed to do so, Chief Minister Howard Quayle has said.
Just under 140 countries have taken agreed to force the world’s biggest companies to pay their fair share of tax, with plans for a global minimum corporate tax rate of 15% to be imposed by 2023.
The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (catchy name), has been agreed by 136 countries, include the Isle of Man and will impact businesses and will target businesses with global sales above 20 billion euros (£17bn) and profit margins above 10%.
Chief Minister Howard Quayle said: ‘It will be for the next administration to consider how best to position the Isle of Man in the light of these reforms, but I am confident we are well-placed. The two pillars, when eventually implemented by a critical mass of jurisdictions, will directly affect only a small number of businesses on the island that are part of large multinational groups.
Treasury Minister Alf Cannan added: ‘The island has an established policy of supporting international standards developed by organisations like the OECD that are adopted globally and provide for a level playing field – this approach has proved vitally important to the health of the island’s economy since it was first introduced in 2000.
‘I believe the only way for a small, open economy to thrive over the long-term is to work constructively with both local businesses and the international community. The Isle of Man’s record of successfully implementing international tax standards demonstrates this.’
Will It Affect Us?
For most Manx businesses, this will make no difference at all, in reality it is aimed at big companies like Amazon, Google and Facebook, not Bohemian Coffee or Toy Master.
Simply put, Covid. The work has been ongoing for about a decade to get to this point, but the pandemic has somewhat forced the hand of political leaders. All around the world Govs have spent a lot of cash in the last year and borrowed even more, they need to start making it back and while taxing regular people isn’t a popular idea, very few people are going to argue with taxing Mr Bezos given that Amazon had a brilliant pandemic and he’s recently spent millions on a billionaire d*ck swinging competition to get into space.
Will it Work?
Probably but maybe not as well as it is intended. Argentine economy minister Martin Guzman said the proposals would do little to help developing countries. Despite agreeing to the pact, he had argued for a tax rate of at least 21%.
While the charity Oxfam said the 15% rate was too low and would ‘let big offenders… off the hook’. The charity also pointed out that the corporate tax rate in industrialised countries averages at 23.5%.
Oxfam’s tax policy lead Susana Ruiz said: ‘The world is experiencing the largest increase in poverty in decades and a massive explosion in inequality but this deal will do little or nothing to halt either. Instead, it is already being seen by some wealthy nations as an excuse to cut domestic corporate tax rates, risking a new race to the bottom.’