Senator John Le Fondré said the US needed to ‘look closer to home’ and pointed towards the low-tax states of Nevada, Wyoming and South Dakota, as well as the President’s home state of Delaware.
The US wants to see a 21% minimum rate to stop companies from shifting their profits to low tax jurisdictions. It would mean that, if a company from the US or any other country was based in Jersey, for example, the home country would be able to ‘top up’ the tax paid in their own jurisdiction to make it reach the global minimum rate.
According to those familiar with the plans, the policy is aimed at tech giants such as Facebook, Amazon and Google and clamping down on large companies shifting their profits into low-tax jurisdictions.
Speaking to the i newspaper, Senator Le Fondré appeared to criticise the idea, adding that the Island was ‘not a tax haven’, was well regulated and that its financial services laws were ‘robust and efficiently enforced’.
‘Some people need to look closer to home before involving themselves in the tax policies of others. Take Delaware, for example. Perhaps the US should look at states like Delaware before telling the rest of the world what to do,’ he said.
However, a spokesperson for the US Department of the Treasury said their country needed to work with other jurisdictions to ensure corporations were taxed fairly. They said: ‘Today, international tax architecture isn’t well suited to a global economy and the Biden-Harris administration believes it is imperative to work with other countries to end the pressures of tax competition and corporate tax base erosion.
‘A global minimum tax would make sure the global economy thrives, based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth and prosperity, while improving fairness for middle-class and working people.’
In the UK, Chancellor Rishi Sunak last week did not give his backing to the plans. According to an article published by the FT, he said he would only consider supporting a wider package which included a fairer system for taxing large multinational companies. It added that the UK Treasury accused Biden of trying to get tech firms to pay tax ‘in California when it ought to be paid in the UK’.
John Christensen, a former Jersey government economic adviser and director of the campaign group Tax Justice Network, said he did not think Senator Le Fondré’s comments were valid.
He said: ‘He does not have a point. The global rules for taxing multinational companies are global and they currently enable multinational companies to shift profits to low-tax jurisdictions or tax havens – call them what you will. That is the point that Biden is trying to address.
‘It is long overdue that the US and other leading countries address the rules failure that allows multinational companies to shift profits to tax havens and, of course, we totally welcome this move to a minimum effective tax rate. That is a major step towards removing the facility for multinational companies to shift profits and avoid paying tax.’
Asked whether Mr Biden was hypocritical in his proposed tax reforms, regardless of the comments made by Senator Le Fondré, Mr Christensen highlighted how the US was also planning to raise its domestic, federal rate of tax.
‘There is no hypocrisy there whatsoever and he [President Biden] recognises that tax havens undermine the ability of the United States and all other countries to tax multinational companies and he wants to take a lead in tackling this issue,’ he said.
‘There is no question that South Dakota, Nevada and Delaware are engaged in facilitating offshore secrecy and helping people to avoid and evade tax – there is no question about that. But his measures aim to address all of that.
‘It is entirely consistent with the direction of travel with the Organisation for Economic Co-operation and Development countries that are trying to find a solution to this long-standing problem of how to tax multinational companies fairly.’
A spokesperson for Jersey Finance, which works to promote Jersey’s financial-services industry, said that Jersey had a strong track record in meeting and adapting to the highest global standards on tax.
They said: ‘The important issue in relation to global corporate tax is that standards are applied in a non-discriminatory manner to achieve a level playing field. We believe we can continue to work with our key global partners and play an important role in supporting effective cross-border investment.’