G7 FINANCE MINISTERS TAX CLAMPDOWN A DOUBLE-BLOW

By Michael Jarvis, London UK

Finance ministers of the Group of Seven (G7) richest economies have made two significant decisions that carry potential significant implications for Cayman and other financial services centres.

Not only have they agreed to impose a 15 per cent global corporate tax on major tech companies and other multinationals, especially those which transact much of their business online.

BENEFICIAL REGISTERS

Agreement was also been reached at their meeting in London last week to “to implement and strengthen registries of company beneficial ownership information in their respective jurisdictions.”

Company beneficial ownership registry records who ultimately owns or controls a company – the ‘beneficial owner’.

According to the communique issued at the end of the G7 finance ministers meeting, “this is a major step forward in global efforts to tackle illicit finance.”

This will now be taken up by leaders of the Group of Seven (G7) countries - Canada, France, Germany, Italy, Japan, the United States and the United Kingdom - when they also meet in London this Friday.

The beneficial ownership issue had caused some friction between the Overseas Territories and the UK dating back to the 2018 UK Sanctions and Anti-Money Laundering Act which demanded that the OTs enact legislation to make companies ownership registers publicly accessible.

Following consultations, further legislation was introduced by the respective jurisdictions to further safeguard their financial services sectors from possible exploitation.

The G7 finance ministers communique said the UK recently announced its intention to legislate for a set of significant reforms to its own Companies House, including giving it greater powers to challenge the information submitted and requiring identity verification for people who manage, control or set up companies.

It said Britain was one of the first countries in the world to introduce a public beneficial ownership registry in 2016 – the Persons of Significant Control Register maintained by Companies House – which has more than 5.1 million names of people with significant control over UK registered companies.

The British government has also said it intends to create a new public register of overseas entities who own UK real estate, stating that “legislation to enable these reforms will be brought forward as soon as parliamentary time allows”.

GLOBAL CORPORATE TAX

Regarding the imposition of the global corporate tax, UK Chancellor of the Exchequer (Minister of Finance) Rishi Sunak has said it would create “a more level playing field for UK firms and cracking down on tax avoidance.”

The agreement means that major tech and other multinational firms will pay taxes in the countries where they operate and not only where they have headquarters based outside their country of origin.

The matter which has been debated for several years was recently given added momentum by US President Joe Biden, especially due to the economic pressures caused by the COVID-19 pandemic.

US Treasury Secretary Janet Yellen said the move would "help the global economy thrive, by levelling the playing field for businesses and encouraging countries to compete on positive bases."