Addressing the recent Jersey Finance Funds Conference, Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said that co-operation was at the heart of international tax matters. Looking back seven or eight years, Pascal noted that it was ‘angry people in the street’ that had kick-started tax reform. Governments needed to react and the sense of voters was that governments were letting businesses and the rich avoid paying tax by using weaknesses in international tax laws.
The OECD are on the side of growth, but they also want to ensure tax is paid in the most appropriate place. For them, avoiding double taxation is as crucial as ensuring tax is paid in the right jurisdiction. Pascal began by discussing the first key measure, tax transparency. With all but one OECD country signed up to exchanging tax information and all but four ready to move to automatic exchange it showed, he said, that international finance centres like Jersey were already participating in a new, more positive international tax community.
The introduction of BEPS, he said, was another positive. ‘People on the streets want corporations and the rich to pay tax, in their jurisdiction, and why shouldn’t they?’ he said. BEPS’ introduction will ensure companies must have ‘substance’ in a jurisdiction in order to effectively claim domicile there. It will be uncomfortable, he said, for companies that have benefited from globalisation without restriction or regulation, but necessary to the future growth of the global economy.
In the panel session that followed Pascal’s talk there were some concerns raised. While Jersey is seen as an example of a jurisdiction that will flourish under the new rules, with businesses relocating to the island and employing staff and utilising office space and other service providers (in other words giving themselves substance) there are areas where more clarity is needed.
Debt, for example, was highlighted as something that needed to be kept at top of mind. Simon Witney, the chairman of the BVCA Legal and Technical Committee, said that, as it stands currently, BEPS has the potential to penalise companies using debt to grow their businesses and complicate the use of debt by international businesses.
There might be a pause in development however, for the Brexit referendum to run its course, but overall the view of the conference was that the post BEPS world will be full of opportunities for Jersey.