TALKS between Guernsey, the UK and EU member states over the taxation of savings income have improved global understanding of the island’s constitutional position. In revealing its formal stance on the long-running issue today, the Policy Council said that discussions on model agreements had improved general knowledge about Guernsey’s constitutional position and autonomy on tax matters, including recognition of the island’s independent international personality.

‘The process of demonstrating Guernsey’s equivalence in terms of legislation relating to undertakings for collective investment has also highlighted the island’s high standards of regulation,’ said Chief Minister Laurie Morgan.

He said the model agreements would protect the island’s competitive position and would not come in until a level playing field applied across the EU and other territories.

‘The Policy Council believes that the model agreements represent the best-possible outcome for Guernsey in the negotiations with EU member states and strongly recommends their acceptance by the States,’ Deputy Morgan added.

The States will meet specially on Monday 21 June to debate the issue. If members agree, Deputy Morgan will be given the power to sign bi-lateral agreements with EU member states by the end of the month.

The Policy Council will handle most of the issues, but only the States can terminate any of the agreements.

The Crown Dependencies – Guernsey, Jersey and the Isle of Man – worked together in drawing up the agreements, in line with requests from the financial services industries in the islands, which wanted consistency.

The industry favoured retention tax, with the option of exchange of information, because it meant no competitive disadvantage compared to EU member states and third countries including Switzerland.

The new agreements could come into force from January 2005, but are more likely to be delayed a further 12 months.

Only a limited number of Guernsey deposits are expected to be affected by the new agreements, as the draft EU directive applied only to EU resident individuals’ savings income and not to companies, most trusts or non-EU business.

The UK Caribbean overseas territories have used Crown Dependencies’ model agreements as the basis for their own EU agreements.