The Guernsey Government’s publication of a consultation document on its future corporate tax regime has been welcomed by the promotional agency for the island’s finance industry.
Peter Niven, chief executive of Guernsey Finance, believes that it is a major step towards identifying a corporate tax regime which is both internationally compliant and remains competitive.
“Publication of the consultation document is positive news for the iland’s finance industry,” says Niven.
“It is important that we adopt a corporate tax package which maintains and indeed enhances the business flows into the Island and I am confident that this demonstrates we are making significant progress towards establishing a regime that is both internationally compliant and competitive.”
The consultation document reinforces the fact that Guernsey is seeking a revised regime which meets five key criteria. These are that any revised regime must: be competitive; be internationally acceptable; sustain Guernsey’s economy; be simple and straightforward; and give rise to reciprocal benefits.
Niven says: “The consultation document clearly recognises the fundamental importance of tax neutrality to the 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. 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’s current “zero-10” regime was introduced from 1 January 2008 after the European Union Code of Conduct Group ruled in the late 1990s that certain practices within the previous regime were non-compliant with the Code. The Isle of Man and Jersey introduced similar zero-10 regimes.
Last year, the UK Treasury informed the three Crown Dependencies that a change in attitude arising out of the unprecedented world economic circumstances meant that certain EU member states were now unlikely to accept such fiscal regimes as being compliant with the spirit of the code. Against this backdrop, in October 2009 Guernsey announced that it would review its zero-10 corporate tax regime.
Niven says: “Clearly the finance industry internationally thrives on confidence and certainty and in that respect the industry here on the Island is no different. News that the EU Code of Conduct Group was unhappy with our zero-10 regime was disappointing and so it was vital that we made sure our industry clients understood the issues, that they could be confident we were engaged with both the UK Government and the EU in Brussels and most importantly, that we would be working hard to maintain the Island’s competitive edge as a leading international finance centre.”
Last month it was publicly confirmed that the zero-10 regimes of the Isle of Man and Jersey will be reviewed by the EU Code of Conduct Group from September 2010. However, the EU Code of Conduct Group has no plans to review Guernsey’s regime.
Niven adds: “I was pleased with the recent news that Guernsey’s corporate tax regime is not to be reviewed by the EU Code of Conduct Group in September and I am particularly pleased to see Guernsey engaging positively with the code group. Indeed, the Chief Minister said last week that Guernsey ‘now has a good understanding of the position and processes of the code group.’ Guernsey’s destiny remains in its own hands and with strong leadership and a highly professional team leading the tax review I am confident that Guernsey will maintain its undoubted edge and pre-eminence in international financial services.”
The findings of the EU Code of Conduct Group review into the zero-10 tax regimes of both the Isle of Man and Jersey will be taken into account along with the responses to the consultation which closes on 27 August. It is expected that a formal statement on the direction of the future corporate tax strategy will be made during the Budget in December.
