Demands mount for tax cuts when zero-10 goes

Saturday 24th October 2009, 2:30PM BST.

Charles Parkinson TREASURY is under pressure to lower personal, property and other taxes when corporation tax is brought back.

Chamber of Commerce president Paul Luxon said he would lobby for alterations to the rates of property tax and social security contributions – which rose to help fill the black hole left by zero-10 – to make up for increases in corporation tax.

He expected others to do so as well – and islanders yesterday said that they expected to benefit when the changes were introduced.

Treasury minister Charles Parkinson (pictured) said the entire tax structure would be reviewed under the proposals, including personal taxes, social security contributions and property taxes.

‘I think that’s all up for grabs,’ he said. ‘But the general corporation tax rate of 10% is still half the rate we used to have, so I don’t suppose we can be particularly generous.’

Ending zero-10 has been forced upon the island by European Union objections to the zero-10 system introduced less than two years ago. In an emergency Billet released yesterday, the Policy Council recommended a review of the system based around a ‘general corporate tax’ rate of 10%, which would reduce the ‘black hole’ by a theoretical £50m. or £1,100 per taxpayer.

But Deputy Parkinson said he did not want to raise expectations.

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1
Frank

October 24, 2009 at 5:00 pm

Surely at this stage tax possible tax cuts are just not possible to predict – it depends on how much business the island loses, which Mr Parkinson expects to be mainly from the finance sector.

This will reduce the number of employed people, and therefore mean reduced income tax and social security contributions. Job losses would also have potential serious effects on the prosperity of the island economy generally.

The sensible plan would be to have a settling down period to see how much business and connected tax take we lose, and THEN properly calculate what taxes the island can afford to cut, if any.

To go rushing blindly in to a voter pleasing rash of tax cuts would be foolhardy in the extreme, but if that happened, on past experience of Guernsey governments I suppose we should not be too surprised!

Also, what about rebuilding the island’s financial reserves and financing all the capital projects we have committed to?

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2
ExGurn

October 25, 2009 at 4:42 pm

Quote from Money Observer comment today: “Countries that defy global standards would risk turning themselves into bonus-havens with all the disadvantages suffered by tax havens; a magnetic attraction for the “dark pirates” and a relatively impoverished native population, dependent on the patronage of a rootless elite.”
The article was about bankers’ bonuses but equally applies to tax avoidance in my opinion. The ending of zero 10 is forcing the States’ hand but could result in a more sustainable and honest economy. And maybe the house prices will be more realistic so I can afford to come back!

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3
CD

October 26, 2009 at 4:56 pm

Our personal taxes are still extremely low compared to the mainland. In my view we would be better off leaving these as they are (with a commitment not to increase them again for the foreseeable future).

Added together with the proposed new 10% corporation tax rate we may well find ourselves becoming self-financing once again. Who knows, tidal energy and a renovated Beaucamp School might actually become realities.

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