He also reiterated vows made over the past two years that Guernsey would “not undermine its economy through any revisions to its [corporate tax] regime”, and that it therefore would retain “the zero product for the clients of Guernsey’s business…irrespective of the outcome of the review”.
Trott said the review would begin early next year, at a meeting of the Code Group in early February.
“Guernsey’s regime will remain internationally competitive and as competitive, if not more so, than our closest competitors,” Trott told his Assembly audience.
Under zero-10 regimes, most businesses pay no corporation tax, while some industries, such as banks, pay 10% and a few pay 20%.
As reported, ECOFIN (Europe’s Council of Finance Ministers) is expected today to formally adopt recommendations made to it by the Code of Conduct Group concerning the recently-revised zero-10 tax regimes of Jersey and the Isle of Man.
Both of these islands — the other two of Britain’s three Crown Dependencies — changed their personal tax codes in order to remove so-called “deemed distribution” provisions, to meet concerns raised by the Code Group when it reviewed their zero-10 schemes, beginning in 2010.
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.
Like Jersey and the Isle of Man, Guernsey also makes use of a zero-10 regime, but was excluded from the Code Group’s initial review, announced in October 2009, after it made a commitment to undertake a formal reassessment of its corporation tax regime, with a view towards possibly scrapping zero-10.
In his address today, chief minister Trott said he believed the Code Group review would “provide technical clarity on unique aspects of Guernsey’s current regime”.
He added: “Whilst we may regret that it will not be possible to conclude the review process in this States term, we believe strongly that it is most important that the right conclusion is reached, and it is important that decisions, and any revisions that may be proposed, are not made in haste, particularly those that may affect the States fiscal position.”
