THE next few days should finally prove whether Deputy Charles Parkinson’s alternative tax package is EU code-compliant. With the States set to discuss the Policy Council’s proposed future taxation strategy next week, the Treasury and Resources deputy minister is continuing his campaign to generate support.

One aspect of his package allows any regulated financial services company to elect to be taxed in the 20% bracket, or alternatively pay a 7.5% payroll levy.

‘Some have questioned whether an elective rate of tax is code-compliant, whether it is permissible to have such an option under the EU code of conduct,’ said Deputy Parkinson.

‘Both Jersey and the Isle of Man are introducing elective rates of tax and the Isle of Man proposal is due to receive Royal Assent any day now. I don’t believe that such measures breach the code.’

He added that it was inconceivable, if the Isle of Man’s proposals were given Royal Assent, that the system should be in breach of the code.

And Deputy Parkinson said that the council had dismissed his proposals because it believed they were not compliant.

The payroll tax would generate £40m. per year, allowing Deputy Parkinson to eliminate the Policy Council’s proposed increase in social security contributions.

He has also produced schedules showing that Guernsey’s tax regime under his proposal would be ‘fully competitive’ with Jersey and the Isle of Man for all sectors.

The Parkinson package limits the use of the contingency reserve to a maximum of one quarter – the council’s proposal would allow up to a half.

‘Because my proposals would raise a great deal of extra tax, the size of the States deficit would be significantly reduced,’ said Deputy Parkinson.

‘We would therefore not need to rely on the contingency reserve to such a great extent.’

When it set up the reserve, the States intended it to cover six months of revenue expenditure in case of emergencies or a prolonged downturn in the economy.

With current annual revenue expenditure at £300m., Deputy Parkinson said his proposals complied with this intention.

‘My proposals would produce substantially more tax than those of the Policy Council and would collect that tax largely from the beneficiaries of the zero-10 regime.’

He added that it was important his amendment, which consists of nine proposals, was accepted as a package.

It will be debated as a whole, but members could tinker by accepting it in the first round of voting and then voting against individual propositions when they come around later.

Social Security minister Mary Lowe is seconding Deputy Parkinson’s amendment.

* Deputy Parkinson will hold a public presentation of his proposals at Hautes Capelles School today from 7pm.