In the first of a new monthly series on Channel Islands business, guest columnist Peter Body, editor of Business Brief magazine, talks about how Guernsey and Jersey would be better off working together… Living in Jersey gives you an interesting perspective on what’s going on in Guernsey.

Being a Guernseyman living in Jersey, the perspective is not only interesting – it’s downright confusing.

From where I sit, I can’t quite make out whether Guernsey has got it right in comparison to Jersey.

Of course, my view depends on what ‘it’ is.

If you’re talking about quality of life, economic prosperity, political involvement or community spirit, then Guernsey has a lot to be proud of.

But if ‘it’ refers to fiscal reform, the quality of the public infrastructure and housing matters, then the picture is far less positive.

Let me make one thing clear at the beginning of what will be a series of columns (God and the editor willing).

I love both Jersey and Guernsey (and the other Channel Islands) and I don’t believe any one them is the source of all wisdom.

What I do believe passionately is that we can learn from each other and that we’re undoubtedly better off working together.

But I’ve probably already upset some of my Guernsey friends by suggesting that Jersey is more right than Guernsey in some areas.

I will now upset them even more by suggesting that one subject in which Jersey is more right than Guernsey is probably the most important and contentious area of all – fiscal reform.

I simply do not understand the almost paranoid aversion to introducing a sales tax, VAT, GST or whatever you care to call it.

Of course Guernsey does not want to introduce a new tax. Neither did Jersey.

Guernsey might think that not having a sales tax gives it some competitive advantage.

After all, only Hong Kong out of the major financial centres has not got a similar tax, although even it is thinking about it.

But a 3% GST in Jersey is hardly likely to persuade many investors to switch their allegiance to Guernsey.

It’s also fairly natural that Guernsey should want to hang on to its VAT-free status as long as possible.

However, while I don’t have a crystal ball, I believe it’s inevitable that with the international shift in the tax burden from corporate tax to consumption tax, that Guernsey will eventually have to follow suit.

And the sooner it does it, the easier it will be to introduce. Leave it until a financial crisis forces the change and the island’s reputation will suffer.

It could be said that the reputation of both Jersey and Guernsey has been dented already to some extent because of the tax changes that have been forced on them.

The long-standing stability of the tax system was one of the island’s key selling points.

Unfortunately it had to change and there was nothing (credible) that we could do about it.

Jersey has taken the opportunity presented by the change not only to introduce a completely new tax, but to overhaul the whole fiscal structure.

Once all of this is complete, it’s unlikely Jersey will have to make any more significant changes for a long time to come.

Guernsey, on the other hand, appears to be almost planning for more changes in a salami-like approach to fiscal reform.

The message to the business community appears to be, ‘We’ll try to make it as painless as possible now, but that may not work, so there will be even more pain later’.

You don’t have to look far for evidence that Jersey’s approach in introducing a new sales tax is more realistic.

For years the finance sector in both Jersey and Guernsey have looked down their noses at the Isle of Man which has had to suffer 17.5% VAT.

Crucially, that has meant it has not been anywhere near as reliant as the Channel Islands on income and corporation taxes.

It has been able to meet all the requirements of the new EU standards without batting an eyelid, and it has already introduced measures that will take another two years to achieve in Jersey and who knows how long in Guernsey.

That is truly the nub of the argument.

It’s dangerous to have all your tax eggs in one basket. It is wise to have several different sources of revenue.

Jersey has accepted that, but Guernsey doesn’t seem to want to grasp the nettle.