The Isle of Man has signed up to an international deal designed to curb tax avoidance and politicians say it shouldn’t hit our economy too hard.

At the weekend, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) was agreed by 136 member jurisdictions - including the Isle of Man.

Ireland dropped its opposition to the agreement last week, meaning all OECD/G20 countries, representing more than 90% of global GDP, are now in support of it.

Building on a G7 announcement in June, the ’two-pillar’ solution means that the largest multinational companies will be subject to a minimum tax rate of 15% from 2023.

One tax expert at an island law firm previously warned the Examiner that the plans, pushed by US President Joe Biden, would represent a ’sledgehammer blow’ for corporate service providers.

Greg Jones said that the plans would mean there is little incentive to form a company in any of the current ’zero tax’ jurisdictions, as the tax rate will be on a par with the mainstream countries.

Currently, only large retailers, banking businesses, land and property income are taxed in the island at the respective rates of 10% and 20%.

Under the agreement the minimum tax rate of 15% will apply to companies with revenue above £636.3 million.

Chief Minister Howard Quayle said: ’The two pillars, when eventually implemented by a critical mass of jurisdictions, will directly affect only a small number of businesses in the island that are part of large multinational groups. The Isle of Man is a small, agile jurisdiction with experience of working with local businesses, our partners and the other Crown Dependencies to respond and adapt rapidly to changes in global standards.’

Treasury Minister Alfred Cannan MHK said: ’The island has an established policy of supporting international standards developed by organisations like the OECD that are adopted globally and provide for a level playing field - this approach has proved vitally important to the health of the island’s economy since it was first introduced in 2000.

’I believe the only way for a small, open economy to thrive over the long-term is to work constructively with both local businesses and the international community.

’The inclusive framework agreed an ambitious timeline for the implementation of its two-pillar solution but there remains considerable work to be done to bring it into operation globally.

’The Isle of Man Government will continue to engage closely with the inclusive framework as the technical work advances over the coming months, and this work will feed in to the island’s future economic strategy.’