GUERNSEY’S tax practices are again coming under the microscope of the European Union.
At its meeting in Brussels yesterday there was pressure from some quarters to widen the scope of the EU’s 2005 savings tax directive to close any perceived loopholes in places such as the Channel Islands, Liechtenstein, Monaco and Andorra.
To change EU tax rules all 27 finance ministers must be unanimous and although there appears to be a lack of consensus at the moment, Ernst & Young partner Graham Parrott said it was important for the island to keep an eye on any decisions made by the EU.
‘While not part of the EU, we have still adopted aspects of its law, for example, the savings directive. Zero-10 is a direct consequence of another EU directive, the code of conduct on business taxation. Being so close to the UK has meant that we cannot simply ignore the EU.’
He said any changes would likely take effect in two forms.
‘One is to expand the net of the EU savings directive. There has already been a suggestion that this could be done so to include, for example, payments of interest to companies and trusts.’
The directive is narrow in scope and has been interpreted more narrowly still in both Guernsey and Jersey.
‘However, the difficulties in achieving that should not be underestimated.
‘It took years to agree the original directive and obtaining agreement to any changes will take time,’ he said.
‘The other way will be by applying pressure to the country closest to the territory concerned, which for us would be the UK.’
Guernsey and Jersey also found themselves joining other so-called tax-havens Andorra, Liechtenstein, Monaco, Switzerland and the Isle of Man on the front page of The Independent yesterday in a story labelled ‘Europe vs The super rich’.
The paper was previewing yesterday’s meeting and how Europe had declared war on tax havens, with Guernsey, Jersey and the Isle of Man reportedly attracting about US$1trillion of individuals’ offshore money.
Germany is one of those countries leading calls for a Europe-wide debate on tax havens after hundreds of its wealthy citizens were said to have used a Liechtenstein bank to evade taxes.
Mr Parrott said it was inevitable that when stories about taxes emerged that Guernsey would be included as it was a low-tax jurisdiction.
‘This is an issue that won’t go away and has to be faced up to.
‘The recent experience with Liechtenstein has raised it again, as has the response to the UK non-dom changes.
‘But there is always a tendency to overstate the scale of any perceived problem and the island can be rightly proud of the steps it has taken to minimise the likelihood of evasion being carried on here.
‘Whether or not we should encourage wealthy people to move here with tax incentives is quite another issue and the vultures circling the UK are not just the usual suspects such as Switzerland and Monaco.
‘Ireland and the Netherlands have been among those throwing their hat in the ring.
‘Those in glass houses shouldn’t throw stones.’
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