Explaining Jersey’s decision to consult on the matter, treasury minister Philip Ozouf noted that “international views on tax are changing and Jersey needs to be ready to respond”.
“This review will investigate whether an alternative regime can be identified which taxes more companies with business activities based in Jersey, to replace some of that revenue,” Ozouf added.
The closing dates for comments on Jersey’s tax regime is 30 August, according to the government’s website.
Under zero-10 regimes, most companies pay no corporate tax, although certain sectors, include banking, pay 10%. The specific categories of companies that pay 10% vrs 0% vary among the jurisdictions.
As reported, the EU Code of Conduct Group revealed last month that it would look into the zero-10 regimes of the Isle of Man and Jersey, although it did not mention Guernsey, the third of the three UK crown dependencies, which also has a zero-10 arrangement.This was understood to be because Guernsey had already committed to a review of its corporate tax regime. Guernsey has denied it was because it had already agreed to a flat 10% rate, saying this was an "inference…often erroneously made".
The Isle of Man unveiled a public consultation on its business taxation system in February, days after plans to do so were announced by then-treasury minister Allan Bell. The IoM was the first of the three jurisdictions to introduce a zero-10 regime, in April 2006.
The three crown dependencies were informed by the UK Treasury last October that the EU Code of Conduct Group no longer considered zero-10 regimes to be compliant with the ‘spirit’ of the code, following a change in attitudes resulting from the global economic downturn.
For some cash-strapped, high-tax European countries, zero-10 regimes were increasingly seen as predatory.
Guernsey: ‘statement in December’
Guernsey’s consultation closes on 27 August. In a statement, Guernsey said that in addition to the comments it received, it would also take into account the findings of the EU Code of Conduct Group review of the Isle of Man and Jersey zero-10 regimes.
Guernsey’s plan is to issue a formal statement on the direction of its future corporate tax strategy when it unveils its budget in December.
Importance of tax neutrality
Guernsey Finance chief executive Peter Niven noted that the consultation document clearly recognised the importance of tax neutrality to the island’s financial services industry.
“This is extremely significant, and reinforces earlier statements from the government that our funds sector will continue to be granted exempt status,” he added.
“It is clear that the needs of the different parts of the finance industry are being taken into account and therefore, however the general rate is applied, Guernsey will ensure that it retains its internationally competitive position in financial services.”
Guernsey has said it is seeking a revised corporate tax regime that is at once competitive, internationally acceptable, sustaining of Guernsey’s economy, “simple” and straightforward, and which would “give rise to reciprocal benefits”.
