{"id":10084,"date":"2011-05-18T09:58:36","date_gmt":"2011-05-18T08:58:36","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=10084"},"modified":"2011-05-18T10:45:44","modified_gmt":"2011-05-18T09:45:44","slug":"what-happens-to-glencore-if-jersey-fails-the-eu-code-of-conduct","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2011\/05\/18\/what-happens-to-glencore-if-jersey-fails-the-eu-code-of-conduct\/","title":{"rendered":"What happens to Glencore if Jersey fails the EU Code of Conduct?"},"content":{"rendered":"

I've noted today <\/a>that I think Jersey will fail the EU Code of Conduct tests for acceptability on business taxation later this year. I may be wrong, of course: I have to recognise that risk. But to date I've been right on this issue, when the\u00a0massed\u00a0opinion of almost all in the\u00a0Crown Dependencies was that I was wrong.<\/p>\n

As I've also noted recently, Glencore, the world's\u00a0largest trader in commodities, has launched\u00a0itself\u00a0onto the world's<\/a> stock\u00a0exchanges\u00a0through a Jersey company.\u00a0\u00a0It has the right to do so, of course. But as I noted, its prospectus said<\/a>:<\/p>\n

Jersey taxation legislation provides that the general basic rate of income tax on the profits of companies regarded as resident in Jersey or having a permanent establishment in Jersey will be zero per cent and that only a limited number of financial services companies shall be subject to income tax at a rate of 10 per cent. There is no capital gains tax in Jersey.<\/p><\/blockquote>\n

No doubt this was an\u00a0extremely\u00a0important factor in its decision to\u00a0locate\u00a0in the island. I would suggest it was\u00a0fundamental.<\/p>\n

The trouble is that indicates that Jersey fails test 3 of the Code of Conduct<\/a>, which says:<\/p>\n

3. Whether advantages are granted even without any real economic activity and substantial economic presence within the Member State offering such tax advantages<\/p><\/blockquote>\n

Let's presume for these purposes that:<\/p>\n

a) Zero tax is considered an advantage;<\/p>\n

b) Glencore is not really moving to Jersey - there is no sign at all that it is: it is merely using the location as ahead office address;<\/p>\n

c) That\u00a0means\u00a0the economic substance of Glencore will remain, as now, in\u00a0Switzerland;<\/p>\n

d) Glencore will not as a result have 'any real economic activity and substantial economic presence' in Jersey. I think that's likely in terms of scale.<\/p>\n

Now, I stress, Glencore is doing nothing wrong.<\/p>\n

But Jersey has not yet proven it can offer these\u00a0advantages: the EU has not ruled its tax system that does so is acceptable. Indeed, it has ruled to the contrary.<\/p>\n

Of course, no doubt Glencore has been\u00a0advised\u00a0that the reforms announced by\u00a0Jersey\u00a0yesterday will keep the EU happy. The\u00a0trouble\u00a0is Jersey and its lawyers have always got these things wrong to date: they've called every shot incorrectly on the EU\u00a0Code\u00a0of\u00a0Conduct.<\/p>\n

And then what? What if Glencore finds it can't enjoy the\u00a0benefits\u00a0that it's been promised? That will be interesting. Firstly for Glencore. Second for its investors. Thirdly for Jersey.<\/p>\n

Watch this space.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

I’ve noted today that I think Jersey will fail the EU Code of Conduct tests for acceptability on business taxation later this year. I may
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