The action will be welcomed by businesses on both islands, for which uncertainty about tax makes long-term planning difficult.
Guernsey also makes use of a zero-10 regime but was excluded from the Code Group’s review after it made a commitment to undertake a formal reassessment of its corporation tax regime, with a view towards possibly scrapping zero-10 and replacing it with something else.
Chief minister Lyndon Trott will make a statement this morning on corporate tax in an address to the States Assembly, a Guernsey government spokesman said yesterday.
Guernsey ‘will not undermine’ economy
In a statement last September, after the Code Group said it had accepted that changes made by Jersey and planned by the Isle of Man to their zero-10 regimes would remove those elements that the group earlier had said were harmful, Trott said Guernsey would continue with its review of its corporate tax regime.
However, he reiterated previous vows that Guernsey "will not…undermine our economy by placing it at a competitive disadvantage to other jurisdictions”.
If it were to seek to retain its zero-10 status, it is expected that Guernsey would be required to remove the so-called deemed distribution provisions in its personal tax code, in line with what Jersey and the IoM did in order to meet the Code Group’s concerns.
Deemed distribution rules are anti-avoidance provisions under which, in certain circumstances, island residents are deemed to have received a dividend from a profit-making island company in which they own shares, whether they actually have or not. Such “distributions” are then taxed as income, which is why eliminating them may result in less tax coming in to the government.
Under zero-10 regimes, most businesses pay no corporation tax, while some industries, such as banks, pay 10% and a few pay 20%.
Some countries with much higher rates of corporation tax regard zero-10 schemes as predatory, and would like to see them replaced.
