The Council of Ministers has announced that Jersey is to maintain its zero-ten tax regime, following a recent review by the EU Code of Conduct Group and High Level Working Party.

Concerns over deemed distribution and attribution rules were raised by the EU, and the decision has been taken to remove these provisions with effect from January 2012.

In the statement made to the States Assembly, the Chief Minister, Senator Terry Le Sueur, said: “This action allows us to retain our corporate tax regime while meeting the concerns of the EU. Maintaining tax neutrality in a simple and transparent way provides stability and certainty for businesses operating here and sends a clear signal that Jersey continues to provide a competitive tax system which will safeguard the island’s future economic well-being.”

The withdrawal of deemed distribution and attribution rules is subject to the agreement of the States Assembly, as legislation will be needed. Work will continue to monitor the impact of this change, but Treasury forecasts estimate it will create a temporary cash flow issue rather than a reduction in the total tax take.

The EU Code of Conduct Group is meeting on 17 February and has been informed of this decision to remove the deemed distribution and attribution provisions.

Guernsey, meanwhile, in the face of EU objections, has already declared its willingness to abandon the whole zero-10 regime. A statement released by the island's Policy Council states: “It is premature to comment on the specifics of today’s announcements but they will be analysed so that they can be taken into account for inclusion in the Green Paper due to be published later this year. Guernsey has not been subject to a review by the Code Group, and our five key objectives to meet when deciding on any revision of its corporate tax regime remain: be competitive; internationally acceptable; sustain Guernsey’s economy; be based on a simple, solid rationale and; give rise to reciprocal benefits.”


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