The Virgin Islands expects the next United Kingdom government to respect its decision on whether to sign up for the Global Minimum Tax initiative, Deputy Premier Lorna Smith said last week.
However, she stopped short of hinting what that decision might be.
Ms. Smith said the territory is in “no great rush” to make up its mind on the levy, which requires firms with a turnover of at least 750 million euros for three consecutive years to pay a 15 percent baseline tax where they operate.
The initiative, spearheaded by the Organisation for Economic Cooperation and Development, has already been rejected by the Cayman Islands but embraced by Bermuda.
With the likelihood of a major political change in the UK within months as the Conservatives appear set to lose power after 14 years in the face of a resurgent opposition Labour Party, Ms. Smith said she wants London to stay out of the VI’s GMT decision.
“Once we have received the sound advice that we expect to receive, I would expect the Labour government would respect that,” she said during a press conference last Thursday. “And as an overseas territory, … the British Virgin Islands does make its own rules. I don’t want to call us a sovereign country, but in terms of our laws … we expect Britain to respect us.”
Ms. Smith added that that she was not concerned that rival financial hubs in the region had already declared their GMT positions.
“The BVI does not compare itself,” she said. “But the BVI has in fact advertised for consultants to advise us on the best way forward.”
This selection process is at an “advanced stage,” she added.
“We should be able to make an announcement very shortly in terms of how we are going to move forward with the Global Minimum Tax based on the advice that we receive from those consultants,” she said.
Pressure?
Dr. Peter Clegg, a professor at the University of the West of England who specialises in the overseas territories, has previously suggested that a new Labour government could pressure the VI to adopt the GMT.
The global tax push is intended to prevent a race to the bottom in headline corporate rates internationally, its supporters say.
Initially brokered by 140 countries in 2021, the initiative will enable countries to impose a top-up levy on profits made by large multinational enterprises if they are taxed below 15 percent in another jurisdiction.
The reform took effect on Jan. 1 in 55 countries, including European Union members, the UK, Japan and South Korea — though holdouts included the United States and China.
Despite the fact that the UK endorses the GMT, the current UK Conservative government has appeared reluctant to impose its will on overseas territories regarding the issue.
Baroness Vere of Norbiton, parliamentary secretary at the UK Treasury, told the House of Lords on Feb. 26 that the OTs “set out their own tax legislation within their own legal structures, and it is certainly not for the UK government or parliament to drive a coach and horses through that.”