A worldwide tax crackdown aimed largely at giant multinationals is taking effect, but the financial impact on the Virgin Islands remains unclear, experts have said.
Advocates of the Global Minimum Tax say it is intended to prevent a race to the bottom in headline corporate rates internationally.
Under the reforms, initially hammered out by 140 countries in 2021, nations will be able to impose a top-up levy if profits by a multinational enterprise with an annual turnover of 750 million euros or more are taxed below 15 percent in another jurisdiction. The new regime took effect on Jan. 1 in 55 countries, including European Union members, the United Kingdom, Japan and South Korea — though the holdouts include the United States and China.
In the OTs
The VI government has yet to declare whether it will sign on to the GMT. Among other UK overseas territories, the Cayman Islands has stated it will not do so and Bermuda has said that it will.
A Jan. 8 working paper by the Organisation for Economic Cooperation and Development predicted that “investment hubs” including the VI would initially benefit from the GMT, but could find difficulties in the future as the regime diminishes demand for complex tax structures.
Those “investment hubs” — which the OECD defines as jurisdictions where inward foreign direct investment exceeds 150 percent of gross domestic product — also include the Netherlands and Ireland, which the OECD expects to be among the biggest winners, as well as Jersey, Guernsey, Luxembourg, Singapore and Switzerland.
The Virgin Islands
But Robert Briant, partner and head of VI corporate practice at Conyers, told the Beacon that the situation would likely prove to be different among each of these jurisdictions.
“The OECD report listed a number of jurisdictions in its list of ‘investment hubs,’ and their implementation of GMT can, and will, vary,” he said.