Wednesday 29 June 2016
Delivered by Deputy Trott, Vice-President, and Lead Member on International Business Affairs, Policy & Resources Committee, to the States Assembly on Wednesday 29 June 2016
**Note to media - check against delivery**
Sir,
In an increasingly connected world, national tax laws have not always kept pace with global corporations, movement of capital and the rise of the digital economy. This has left gaps and mismatches that can be exploited to generate double non-taxation.
Base Erosion and Profit Shifting (or BEPS) refers to tax planning strategies that exploit these gaps and mismatches in tax rules to artificially shift profits to low or no tax jurisdictions, where there is little economic activity, resulting in little corporate tax being paid.
In December 2015 the Policy Council established a BEPS working party to assess the OECD's October 2015 action plans in relation to BEPS.
The working party is chaired by Guernsey's former Treasury & Resources Minister, Deputy Gavin St Pier, now President of Policy & Resources Committee and comprises, myself, as Vice-President of the Policy & Resources Committee (and Chairman of Guernsey Finance), as well as tax professionals and representatives of the Institute of Directors and the Guernsey Society of Certified and Chartered Accountants. Representatives of the Guernsey Financial Services Commission are also participating in the working party.
Over the first part of 2016, work has focused on assessing the potential impact of the OECD action plans on the different sectors which comprise Guernsey's finance sector. This has drawn on the views and members of representative bodies such as the Guernsey International Business Association, the Guernsey International Insurance Association, the Guernsey Association of Trustees, the Guernsey Investment Funds Association and the Association of Guernsey Banks.
The working party has been able to arrive at a number of views that will help to inform the work that it does:
That Guernsey is already largely compatible with the BEPS agenda and is focusing on identifying opportunities for business, whilst acknowledging that there will be some challenges. Guernsey's finance sector model and regulatory framework is not conducive to the island being exploited for base erosion and profit shifting and so ensures equivalent outcomes to those the OECD is seeking to secure.
Guernsey can maintain stability and competitiveness as well as a commitment to any new international standards.
That Guernsey businesses are already actively considering how to respond to the new global standards that the BEPS agenda will establish, and that the States, through further consultation with industry, will actively play its part in that through putting in place appropriate legislation and regulatory policy.
That the BEPS agenda is one that government and businesses in Guernsey supports, and will demonstrate that support through the new Policy & Resources Committee being recommended to formally commit to country by country reporting in 2016.
The OECD has agreed a new framework, sponsored by the G20 governments, which will allow all interested countries and jurisdictions to work jointly for the implementation of the package of measures against BEPS.
This framework will bring together all interested countries and jurisdictions as 'Associates' on an equal footing with OECD and G20 countries in the OECD's Committee on Fiscal Affairs to develop international standards related to BEPS and to review and monitor the implementation of the whole BEPS package.
The OECD has invited Guernsey to join the inclusive framework as an Associate for the implementation of the OECD/G20 BEPS Project. The BEPS Project is expected to last until December 2020.
The Policy & Resources Committee has approved the commitment to the OECD project on its Base Erosion and Profit Shifting Project. This means that, as an Associate, Guernsey is committed to the consistent implementation of the comprehensive BEPS Package including its four minimum standards. Guernsey will also be expected to contribute actively to the project, including through policy dialogue and information exchange.
Guernsey will also be required contribute a membership fee of €20,000 from 2017 onwards.
Guernseylooks forward, where possible, to being represented and being able in contribute to the development of the BEPS Project.
Thank you, Sir.
