The statement comes after a two-year review process initiated following the announcement by the EU Code of Conduct Group that it would be investigating harmful elements of the Crown Dependencies' 'zero-ten' tax regimes. Guernsey had agreed with the EU body to undertake its own independent assessment.

Earlier this month, the EU Code Group adopted a preliminary decision - subject to the approval of European Finance Ministers - that both Jersey and the Isle of Man's zero-tax regimes would be compliant with changing international standards if, as proposed, Jersey revoked its deemed distribution regime, and if the Isle of Man revoked its Attribution Regime for Individuals.

Deemed distribution provisions seek to ensure the taxation of individuals’ holdings in profit-making companies as their respective holdings appreciate. A 'deemed distribution' is presumed by the government and tax is liable on the amount irrespective of whether a distribution is disbursed to the company shareholder.

Trott said in his address to the Assembly:

“The outcome of the formal assessment of Jersey and the Isle of Man proposals is indeed welcome as it now provides a degree of certainty and clarity of the view of the Code Group on zero-ten without ‘deemed distributions’. We have known since June 2010, when we met with the Chair of the Code Group, that it was this measure, which in the words of the Chair, 'effectively ring-fenced the zero rate for non-residents', that was considered technically non-compliant, irrespective of any emotional antagonism that any member states had to zero rate regimes in general.”

“What was not known with certainty until September 13th was whether removing this ‘ring fence’ alone was sufficient to alleviate the concerns of certain key member states of the Code Group, particularly as the Code Group had stated that it viewed the regimes ‘as a whole’ as harmful, and it had made very clear that it viewed any attempt to replicate the effects of deemed distributions through the use of other anti-avoidance procedures unacceptable.”

“What is now apparent is that the assurances given by both Jersey and the Isle of Man that no attempt will be made to replicate the effects of deemed distributions through general anti-avoidance rules have been accepted.”

“I communicated to the Assembly in June that the UK had separately stated that it would support the introduction of a territorial regime in the Crown Dependencies, as it has for Gibraltar, and that Gibraltar’s new territorial regime will be informally assessed by the Code Group in September. However, we now know that the informal assessment of Gibraltar’s territorial regime did not take place on 13th September, as had been expected, and has been deferred until later this year.”

“Again, I stated in June that once both these assessments were completed, Guernsey would then have sufficient clarity on the views of the Code Group on both the zero-ten and the Gibraltar territorial regime for our own evaluation of all of our options to be undertaken and that until then, any decision and accompanying publication of any Green Paper on our own direction of travel, would be premature.”

“Over the course of the last two years we have repeatedly made it clear that Guernsey will not, through either the timing of any implementation process or indeed the review process itself, undermine our economy by placing it at a competitive disadvantage to other jurisdictions.”

“The first three objectives of our review [that any new tax regime be competitive, internationally acceptable and sustaining] are key and are to a certain extent symbiotic. A competitive regime sustains the economy; an internationally acceptable regime sustains the economy.”

“Sustaining our economy means ensuring that a regime provides a competitive platform for business but also generates sufficient taxation revenues for government. Removing the deemed distribution measure is technically straightforward and in technical terms a ‘minor’ revision. However, the implications of its removal are not insignificant.“

“This option is simple but not necessarily straightforward. There will be an associated tax loss and as such, is a matter that needs to be considered and a transparent assessment undertaken, because any revised regime must be sustainable in the long run.”

Trott concluded by stating that the government would continue a transparent review of the island's corporate tax regime to establish the best possible outcome for Guernsey, whether that is by removing the island's deemed distribution provisions, or by examining other tax regimes, which might offer reciprocal benefits at EU level.

Trott said that the government would report back to the Assembly once full clarity is viewed on the Code Group with respect to Gibraltar's tax regime.

“Subject to the timing of the Code Group processes, it is anticipated that this Assembly will be able to consider the most appropriate direction of travel for our corporate tax regime and with the full facts and options available to us early in 2012,” Trott concluded.