‘Elephant’ has finally charged

Wednesday 14th October 2009, 12:24PM BST.

When Guernsey International Business Association chairman Paul Meader spoke recently about the elephant in the room everyone wanted to ignore, he wasn’t joking.
That elephant, in the shape of the EU, has charged and in the resulting carnage, Guernsey and Jersey are left holding the corpse of their zero-10 taxation strategies.
Details are scarce because for two days the Policy Council stonewalled requests for information. But what seems to have happened is this: because Guernsey’s zero-10 tax policy never received formal ratification through the EU Code of Conduct for Business Taxation, time has been left for some member states to question its compliance.
The UK, which is supposed to back the Crown Dependencies is such circumstances, now refuses to do so and the chief ministers of both Channel Islands held talks with Treasury minister Stephen Timms yesterday to see what – if any – way exists out of a potentially catastrophic mess.
This, of course, has little to do with tax compliance but everything to do with raw politics and a desire to stamp out of existence two small islands because each is seen as a ‘paradis fiscal’ just because they have no need to tax their inhabitants as massively as their neighbours.
Since the islands first negotiated their zero-10 packages through the UK and also with Europe, the climate has changed and having a tax rate of 0% is now regarded by some EU member states as unspeakably smelly, which is why Guernsey’s entire tax regime, its business plan, and its proposals for reducing the budget deficit have just hit the buffers.
The seriousness of this cannot be over-emphasised, especially the UK’s unwillingness or inability to act on behalf of islanders.
No comment was available yesterday from the Policy Council but a statement is expected today. That will no doubt attempt to put a brave face on things and may even have some comforting developments to report.
But the reality is that the EU, aided and abetted by Britain, has stopped the Channel Islands in their tracks – without using legislation or force.
That it is entirely in Guernsey’s gift to set its own tax rates no longer matters.
The issue now is what else we have to surrender to have any economic future.

1
Roy Bisson

October 14, 2009 at 2:57 pm

I cannot agree with the general tenor of this Comment. To say that “Guernsey’s entire tax regime, its business plan, and its proposals for reducing the budget deficit have just hit the buffers.” is a hugely inaccurate assumption.
If the EC and the UK decide that a Zero tax regime is inappropriate, and to be honest I am not at all surprised and have been saying so loudly for some time, then as long as all jurisdictions are required to apply the same minimum tax level, say 10%, Guernsey’s prosperity should boom.
Of course some financial products designed to benefit from zero tax will have to be re-styled to work under new rules, but Guernsey’s decision not to rush into GST will have proved right.
It is now that we require leadership to grab the Isle of Man and Jersey by the throat and force them into a more sensible regime that will take the pressure off from EU, UK and OECD.

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2
TL

October 14, 2009 at 6:53 pm

I quite agree Roy. The GP misses the point. We did not adopt zero-10 because it was essential for our business, we adopted it because Jersey and the IoM were doing so and we didn’t want to lose business to them.
Now the landscape has changed. We should adopt a regime that works and which is acceptable to the outside world. Jersey and IoM will do the same and so we will not lose business to those jurisdictions but we will still be attractive when compared to the UK or Europe. All in all it could provide a more sustainable future, and one which helps to fill our black hole.

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