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Review: OECD Pillar 2 Review

Committee/Panel: Corporate Services Panel
Launch Date: 29 August 2024 Close Date: 17 October 2024
Review Status: Review concluded Submissions Deadline: 17 October 2024
Review Report: S.R.7/2024 - OECD Pillar 2 Review
Ministerial Response: S.R.7/2024 - Response of the Minister for Treasury and Resources

About

The Organisation for Economic Cooperation and Development (OECD) Pillar 2 initiative represents a significant advancement in international tax reform, aimed at addressing the challenges posed by globalisation and digitalisation. The initiative, formally known as the Global Anti-Base Erosion proposal, is part of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. It seeks to ensure that multinational enterprises (MNEs) pay a minimum level of tax on the income they earn in each jurisdiction, thereby reducing opportunities for tax avoidance and enhancing global tax fairness.

Pillar 2 establishes a global minimum tax rate that applies to profits of MNEs above a certain threshold, regardless of where they are headquartered or operate. This initiative aims to level the playing field by curbing profit shifting to low or no-tax jurisdictions and ensuring that all countries, including developing economies, can collect a fair share of tax revenues.

The implementation of a global minimum tax rate will have significant implications for Jersey's economy, regulatory framework, and its competitive position as a jurisdiction for MNEs. To align with new OECD standards, Jersey will need to adjust its domestic tax policies, altering corporate tax rates and compliance requirements.

Adopting OECD Pillar 2 standards is essential for maintaining Jersey's reputation and global standing. Additionally, it presents potential growth opportunities for Jersey to innovate and diversify its financial services offerings by positioning itself as a compliant and forward-thinking jurisdiction.

Given the importance of this global initiative, a Sub-Panel has been established to ensure focused and targeted scrutiny of the proposals. This review provides the opportunity to conduct a comprehensive analysis of the implementation strategy proposed by the Government of Jersey, ensuring the legislation and strategy deliver the optimal outcome for the Island.

Terms of reference

​1. Conduct a comprehensive review of Propositions P.53/2024 (Draft Multinational Taxation (Global Anti-Base Erosion – IIR Tax) (Jersey) Law 202-) and P.54/2024 (Draft Multinational Corporate Income Tax (Jersey) Law 202-), with consideration to how the underpinning draft legislation and the Government of Jersey's approach for implementing the Organisation for Economic Cooperation and Development (OECD) Pillar 2 Framework provides the optimal outcome for Jersey.

2. Assess Jersey's proposed implementation of the OECD Pillar 2 Model Framework.

3. Evaluate the draft legislations' alignment with the Government's intended objectives and policy goals.

4. Assess the feasibility of the draft legislation for implementing the OECD Pillar 2 Framework, focusing on how it ensures that Jersey's approach can be practically implemented, including the evaluation of timelines, processes, and resource allocation.