ONE of the biggest questions in Channel Island politics should be resolved soon – but we still can’t be certain what the answer will be. That question, of course, is: ‘Has Jersey or Guernsey got it right over the zero-10 tax regime?’

Jersey insisted all along that the central thrust of zero-10 was compliant with the EU tax code and that with minor adjustments it could be made to adhere to the ‘spirit of the code’ as well. Their first assertion is almost certainly technically correct, but the second claim is far more open to debate.

By contrast, the Guernsey States took the diametrically opposite view and moved rapidly to declare zero-10 to be effectively dead in the water after holding high-level talks with UK Treasury officials.

They very quickly – too quickly in some experts’ opinion – decided that Guernsey’s future rate of corporation tax would be circa 10%. They also gave the impression that they would like to make this change as soon as a level playing field existed with the island’s main competitors. Many months later, it’s still not clear if that level playing field will ever come about or if the Guernsey States will have to do one of its biggest U-turns ever and keep the tax on most company profits at 0%.

The good news – from Guernsey’s point of view – is that the stakes are probably much higher for Jersey than they are for us. If the code of conduct group reject the whole zero-10 concept, as we were led to believe was likely by our political leaders, then our sister island really is in the soup. Having pinned so much political and economic capital to the strategy of adapting and retaining the regime, the consequences of having to scrap it altogether would be massive.

Leaving aside the economic turmoil, it’s hard to see how Jersey’s political establishment could survive when they’ve repeatedly assured everybody that zero-10 is just fine and dandy, and simply needs minor tweaking.

On the other hand, if the EU does rubber-stamp zero-10 – albeit without deemed distribution – obviously Guernsey will have rapidly to climb down and abandon its policy of a 10% corporation tax. If we stuck to it when the rate in Jersey was zero, it would be a recipe for rapidly losing business to the other island.

However, the practical implications of a U-turn are less severe for Guernsey than they are for Jersey under the mirror scenario. It would obviously make curing the budget deficit far more difficult but our finance industry would presumably welcome the retention of the zero rate.

Our States members would certainly look a bit daft for reacting like startled rabbits and having to backtrack. But they would no doubt argue that their earlier decision was always subject to that level playing field and their accommodating response to the UK, far from supine weakness, represented canniness in letting other territories fight the zero-10 battle on behalf of all the crown dependencies.

One thing’s for sure. Unless the EU code of conduct group comes out with an incredible fudge, then one island or the other will very soon be having to produce a brand new taxation strategy which bears little resemblance to its current one. Indeed, they probably both have them prepared in advance – just in case.

Which way will it go? It depends who you listen to. Both jurisdictions have been pointing to so-called insiders who suggest they may have got it right.

Don’t take too much notice. Firstly, these ‘informed voices’ are all from the UK and the decision will be a European one – although perversely a while ago it almost seemed as if the UK were the main fly in the ointment. Secondly, none of them have really been the sort of key figures whose opinion can be viewed as definitive.

The reality is that the jury is still out and any speculation is just that. Some things, though, are now quite clear. For instance, we haven’t seen the sort of co-operation and joint working on the issue between Jersey and Guernsey that many had hoped for. Who’s responsible for that will probably only become clear at the end of the process.

Of course, economically, Guernsey and Jersey are natural competitors and it seems as if that fact couldn’t be set aside to pursue joint interests. But make no mistake – the outcome of this particular inter-insular clash will be far, far more profound than the Muratti and the Siam combined.