Latest OECD/G20 developments re ‘GloBE’ proposals for minimum corporate taxation

The OECD’s latest consultations (which seem designed and, ultimately, destined to pave the way to global tax harmonisation) and, in particular, the ambitiously urgent timeframe to reach agreement on these, appear to be driven by the growing unilateral implementation of DST’s. There is some concern that the increasing deployment of DSTs could represent a threat to the tax harmonisation agenda. Whilst the OECD’s proposals are ostensibly presented as a solution for digital taxation, the intended direction of travel would be to expand these measures to consumer-facing businesses.

Fuller details re the consultations can be found on the OECD’s website here

Given the intended wide application of the measures, if implemented (in particular Pillar Two, involving a yet to be specified global minimum corporate tax rate to limit profit-shifting to low/no tax jurisdictions by multi-national groups), this could give rise to the reappraisal of Gibraltar’s own tax regime. Whether Gibraltar is already, or moves towards the ‘right’ side of the global minimum tax rate (if international consensus can indeed be found), it would not be entirely unreasonable to anticipate that the proposals might also require an effective (and not purely headline) tax rate to be levied.

Accordingly, and in order to secure Gibraltar’s position as a specialist onshore financial centre and holding company jurisdiction, Gibraltar may be required, as it has done in the past, to recalibrate its tax regime in order to take full advantage of the opportunities the GloBE initiative might yield. The scope of new opportunities prompted by change (and the course that Gibraltar may chart) will invariably depend on the detail of the measures ultimately introduced by the OECD (both in letter but more importantly in practice). The inescapable reality however is that the current international political and socio-economic trends as they apply to taxation, indicate that changes are likely to be required in the short to medium term.

Gibraltar has a proven track record in tackling regulatory developments, having maintained full compliance with EU and international obligations as those have changed from time to time, during the course of the last 30 years.  Gibraltar is also poised to leverage the advantages and opportunities that Brexit have come to represent, despite the clearly articulated preference for not leaving the EU.  The newly signed double taxation agreement with the UK and the guaranteed financial services market access between Gibraltar and the U.K., as enshrined in the UK’s Financial Services Bill, stand us in good stead to continue to thrive as a specialist onshore finance centre, regardless of the various challenges, international in scope, facing the global financial services industry.

For additional information or to discuss this matter further, please contact Tim Garcia by email on tim.garcia@hassans.gi