A report from Guernsey’s Policy Council, supported in a vote by States members this week, has said that in all probability
the island will have to accept an increase in the general corporate tax to 10%.
“While no clear direction at this stage has been provided by HM Treasury [in the UK],
it is believed that that a movement from a limited to general corporate tax
rate of at least 10% is the likeliest route to achieve such support and success,
as 10% is the lowest general rate of corporate tax within the EU," explained the
report.
The report added that during a recent series of meetings between representatives
of the States of Guernsey and HM Treasury it was communicated that that the EU Code of Conduct Group now considers the 'Zero-10' corporate tax regime
of the Crown Dependencies to be non-compliant with the "spirit" of the European Union (EU) Code
of Conduct for business taxation.
The Treasury went on to advise that the Crown Dependencies would need to review
general corporate tax rates to comply with the Code not just technically, but
with the "spirit" of the Code.
Zero-10 was introduced in Guernsey in January 2008, and the report makes it
clear that the UK Treasury had confirmed that the general approach was compliant
with international standards and the EU Code of Conduct. Previous indications
from the Code of Conduct Group were that Zero-10 would be deemed compliant.
The Policy Council blamed the unprecedented global economic turbulence of
the last 12-18 months and the significant deterioration of the fiscal position
of many European countries for the ruling that the Zero-10 regime is no longer
compliant with the spirit of the Code.
In reviewing corporate tax rates - which will be carried out in close consultation
with Jersey and the Isle of Man - the Policy Council says that Guernsey must
look to provide certainty for investors, and seek to maintain the respect of
the international community.
“It is also of fundamental importance that Guernsey ensures the outcome
of the next stage of the corporate tax strategy be fully sustainable in the
long term, and mitigate any negative economic effects on our economy,”
added the report.
The Policy Council anticipates that proposals to revise the corporate tax
system will come back to the States as soon as practicable after full consultation
and discussion early in 2010.
LAWANDTAX-NEWS.COM
