Finance ministers from Group of Seven countries met in London in 2021 and agreed to back United States President Joe Biden’s proposal for a minimum global corporate tax rate of at least 15 percent. File photo: PROVIDED

Now that the Group of 20 finance ministers has agreed to United States President Joe Biden’s proposal for a global corporate minimum tax rate of at least 15 percent, some experts have speculated that the era of zero-tax jurisdictions like the Virgin Islands is set to end.

However, an expert panel convened on Friday by BVI Finance has joined a different chorus of voices suggesting  that such fears are overblown.

The proposal — a two-pillar solution from the Organisation for Economic
Cooperation and Development/G20 Inclusive Framework on Base Erosion and Profit Shifting — was endorsed in June by the G7, and this month by the majority of OECD jurisdictions, including the VI. Pillar One aims to ensure a fairer distribution of profits and taxing rights among countries, while Pillar Two — the one most relevant to the VI— “seeks to put a floor on tax competition on corporate in come tax through the introduction of a global minimum corporate tax rate that countries can use to protect their tax bases,” according to a BVI Finance press release.

Under the new agreement, multinational corporations, including tech behemoths like Amazon and Facebook, would have less incentive to shift to low-tax locations such as Ireland or the Netherlands, since their profits would be taxed at a minimum rate no matter where they choose to locate.


However, BVI Finance pointed out that the agreement doesn’t force countries to impose a global minimum corporate tax rate, though it allows them to do so without facing legal action in the International Court of Justice or from the World Trade Organisation.

“There is only a right for home countries to impose a top-up tax in relation to multinational enterprises operating in other countries with lower taxes,” the release stated.

Furthermore, the proposals are not all-encompassing. Companies with less than a threshold of 750 million euros’ worth of turnover will not be
affected, and countries do not have a right to impose a topup tax against these businesses.

The tax proposals — including the global minimum rate —aren’t final, but they are expected to be decided at the G20 meeting in October.

In the VI

Premier Andrew Fahie weighed on the decision last week. As a member of the Inclusive Framework, he said, the VI “has been part of the ongoing discussions and will continue to be an active participant” in discussions
ahead of the G20 meeting in October, which is the deadline set to complete the work.

“I reaffirm the territory’s commitment to international standards and regulatory practices,” the premier said, adding, “Efforts by the OECD to develop a solution to the tax challenges posed by the digitalisation of the economy recognise the complexity of the challenge and the need to allow flexibility in its approach.”

The United Kingdom — which has the lowest corporate tax rate in the G7 at 19 percent, though in 2023 it will rise to 25 percent — initially was hesitant toward theagreement.

However, Rishi Sunak, the UK’s chancellor of the exchequer, later praised  the deal and said the country would benefit.

The VI, meanwhile, is among jurisdictions that depend on revenue raised from corporations that locate there to take advantage of their zero percent tax rates, among other reasons. The Economist newspaper said last month that “things look bleak” for the VI and similar jurisdictions.

However, Robert Briant, partner and head of the corporate division at Conyers VI, told the Beacon last month that the main targets of the proposed agreement are massive multinational enterprises in the digital space, which are not the type of clientele the VI typically serves.

Because of that, the VI likely will be seen as a “pass-through” jurisdiction, he said.

“It’s unclear that it’ll have a dramatic impact. It’s not imposing tax policy on specific countries, so it’s not going to require BVI to charge 15 [percent],” Mr. Briant said last month. “For the most part, what we do is to hold entities that carry on business elsewhere.”


The Friday panel — which was closed to the media — consisted of Lisa Penn-Lettsome, executive director of international business for the VI government; Geoff Cook, consultant and chair of the Society of Trust and Estate Practitioners Global Public Policy Committee; and Mark
Pragnell, director of Pragmatix Advisory. Elise Donovan, CEO of BVI Finance, thanked the panellists, according to the press release.

“It is clear that there is much more detail yet to come  on how these proposals will be implemented,” she said. “The BVI will monitor developments closely and will continue to provide clear insights to our clients, members and stakeholders.”