Jersey and Isle of Man deem changes enough to keep zero-10
Wednesday 16th February 2011, 2:30PM GMT.
ZERO-10 could be saved after a last-ditch move by Jersey and the Isle of Man.
But whatever the outcome, Guernsey will find itself with an advantage over its rival Crown Dependencies, according to one expert.
Jersey and the Isle of Man both announced yesterday morning their intentions that the controversial corporate tax regime would stay, but changes would be made to one part of it – deemed distribution – which has been ruled harmful by European policy makers.
Both of their regimes are being reviewed by European finance ministers tomorrow.
Ernst and Young’s Graham Parrott (pictured) said that Guernsey would have no choice but to follow if Jersey and the Isle of Man succeeded in keeping a modified version of zero-10.
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Its just sick watching the greedy corporates still trying to cling onto not paying corporation tax and leaving the Islands with huge black holes that the everyday man and woman has to fill. There are unfortunately some vary sad people in this world who only think of themselves and money.
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Firestorm – it is not really a question of corporates wanting to hold onto zero rate tax, rather the islands’ governments wanting to do so in order to attract business to the islands.
The States are not thinking of themselves, but thinking of the overall island economy.
I agree that a tax strategy that leaves a black hole is not good for the island, but a non-competitive tax rate would have a worse effect. There is a delicate balance to be struck.
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A start would be to increase income tax or social insurance for the people in the island who benefit directly from zero ten such as fund managers, accountants, actuaries, lawyers. For all workers to be taxed at 20% is regressive and those on higher incomes should pay more direct tax, simple as that. Oh no, all that talent would move away wouldn’t it? ……..I doubt it very much.
Sadly there are some privileged people in this island who are oblivious to the poverty and social injustice that exists.
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TL
I don’t see it like that.
Either business wants to reside in Guernsey because of the ‘stable gov, the proximity to the City, the access to sophisticated experts etc etc, and some tax benefit’, or it’s here for the tax alone. You are implying an exodus of business to Iom and Jsy if there was a minimal corp tax levied.
That says loads about how much of a seller our infrastructure provides, no?
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Terry
Unfortunately a lot of the states are business men/women. As for not thinking of them selves that’s debatable. The problem at the end is you cannot have a system of only take. Something has to be put back in to balance the system. If you take the money from people (taxes) to fill the black whole it’s only a matter of time before the people in effect start to ask why they are paying finance to be here and maybe they would be better of with out them. Although Public Servants comments maybe a possible solution.
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as ever Guernsey ahead of the game – not
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Arnald
Don’t be so naive.
Jersey and the Isle of Man have virtually identical “stable gov, the proximity to the City, the access to sophisticated experts etc etc” as we do.
So if you compare Guernsey’s offering with Jersey’s and the Isle of Man’s and all those factors are present, and if we are charging a corporation tax which Jersey and the Isle of Man don’t, then of course we are at a competitive disadvantage and will lose out as a result.
Guernsey may win over many other jurisdictions because of those other factors, but when it comes to the Crown Dependencies its hard to be out of kilter on corporate tax rates because those other factors are constant with them as well. Why do you think zero-10 came about in the first place?
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David
Is there really that many companies dashing around to keep ahead of tax rate arbitrage?
Nonsense.
That logic, worldwide, is a fallacy. Otherwise there’d be so much shifting of residence, it would make business look stupid.
A few do. Most don’t. Most of the banks here wouldn’t have cared a fig if zero ten had been not implemented. They were negotiating their own low rates anyway for non resident business.
You are just being hysterical, as usual, about defending a meme based on shrill arrogance.
No news there.
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Arnald – your post explains why we end up in so many disagreements. You assume that the financial industry is all about existing companies switching jurisdictions in the search for the lowest rates.
In fact, there is very little business involving the movement of existing structures into or out of Guernsey.
Instead, the financial industry relies on the steady stream of new investment structures that are set up, and then collapsed when their lifecycle comes to an end. Whenever these structures are set up the investment managers behind the schemes can choose anywhere in the world depending on what is right for that set of investors and right at that point in time.
If we cease to be competitive, we will probably not see a flood of existing strcutures leaving, but we will see a drying up of new structures, which then will cause a reduction in the number of service providing businesses located here.
In your earlier post you assumed that I was against a notional tax rate. I am not. I am against an uncompetitive tax rate.
I don’t think that we should stick with zero-10 despite the decisions of IoM and Jersey, because I think that it is better in the long run for us to be seen to be playing fair.
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Arnald
I could say “wait and see” but by then the damage is done to Guernsey’s economy.
But that’s of course exactly what you want.
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TL
Then we can agree.
David
No I don’t. I don’t want to see become an increasingly sick host.
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The reality is that there were / are many businesses in the local finance industry that would have happily continued to pay corporate tax but the States of Guernsey was terrified of handing a competitive advantage to the Isle of Man and Jersey. Accordingly, we implemented zero-ten along with the others.
There can be little doubt that all 3 governments for the Crown Dependencies are governments for the very rich, for capital and for the Bankers.
We are seeing constant steps in all three jurisdictions towards more unequal and divided societies because of the deliberate pro-rich agendas being carried out by government, even when business would still be happy to pay a level of corporate taxation.
The fact that the Isle of Man and Jersey are fighting ‘tooth and nail’ to keep hold of zero-ten, whilst Guernsey has been much more pragmatic in anticipating its demise, tends to suggest that Guernsey is being more balanced and possibly less obsessed with keeping the very rich on side. Maybe it is time for us to review not just our corporate tax regime; but also our personal tax regime. It is surprsing that there are no capital taxes in Guernsey. I would also support a progressive system of income tax. The less well off – perhaps those earning less than £30,000 – should pay less in income tax than they do now. Those earning over £100,000 should pay at a higher rate. There is gathering public support for this locally.
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TL
It must be remembered that zero ten was sold to the public as a do or die necessity. It was stressed that business would leave.
Is it the suggestion that without a zero rate no new business would be attracted and the staff who pay the taxes on behalf of those zero rated ephemeral businesses would all be laid off?
As it is, when businesses like Credit Suisse are ‘rationalising’ their fund admin to nothing, what’s the point of the zero rate at all?
Is it really only the capture of those vehicles that dress themselves up as investment, but are really just conduits away from taxing jurisdictions, that are keeping Guernsey afloat?
In Jersey’s case it seems obvious. I think Guernsey has been far more honest.
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Chris – I agree with you that Guernsey is showing itself to be less in the pocket of its finance industry that the other two CDs, and that can only be a good thing. One of the things that make Guernsey a great place to live is that there remains some balance despite the finance industry.
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@Chris : “There can be little doubt that all 3 governments for the Crown Dependencies are governments for the very rich, for capital and for the Bankers.”
There is little doubt, also, that it is a world-wide trend.
Musing about it recently, it struck me that this is (ironically) reverting to feudalism. I coined the term ‘neofeudal’ to describe it, only to find a few days later that it is already in use.
See Wikipedia, for example:
http://en.wikipedia.org/wiki/Neofeudalism
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The rich will bleat but a progressive tax system will have to be introduced in Guernsey. For a very wealthy jurisdiction some services provided by the island are appalling. Mental health care, the Police, Social Services are all under funded and it will get worse. it is an indictment of this avaricious island. There should be no poverty and social deprivation here.
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When will guernsey folk realise the obvious truth? We are paying for the finance industry to be here so the greedy corporations can make more and more profit. As a result people born and bred here are paying stupid money for everything from a loaf of bread to a home of their own. Our family and freinds that can’t afford to be here leave, pushed out of their home land by a business that is supposed to be here for the benefit of guernsey and it’s people – ha yeah right!
Our useless states members have no guts, always dawdling and fumbleing decisions, they sit on the fence waiting to see what action jersey and the iom take instead of having the balls to lead the way.
In this day and age and the worlds current economic climate there is no place for tax havens. The world is already coming down heavily on tax havens and sooner or later the corps will have to pay their fair share.
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@Public Servant,
We have progressive tax. The more you earn, the more you pay in real and percentage terms. Whether the rich should pay even more is a completely different arguement.
Back on subject …. I’d like to see a low corporate tax introduced (say 10% on everything). The Island has shown it’s heading on the right track with 0-10. When businesses look at jurisdictions, they want to operate from they also look at stability. The stance Guernsey has taken is recognised (just look at the HMRC penal charges for avoidance if your account is in Jersey compared to Guernsey).
Would co-operating (not that we don’t) more with other jurisdictions, provide enough comfort and stability for businesses that we could get away with charging (taxing) them higher ? …. big gamble if it doesn’t work.
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Public servant I totally agree with your 12.36pm posting, it is a disgrace that mental health care, social services etc are under funded in a wealthy island like Guernsey, but until we have states members who are willing to vote against the wealthier people of Guernsey this is going to continue. The rich get richer and the poor get poorer. It is an I’m alright Jack situation.
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I notice Peter Rose has bought another Maserati. As one of the bankers that was used the 0/10 supporters I wonder if this was bought from his bonus?
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@David Cranch – in musings of mine recently I was thinking a similar thing, albeit in regard to property.
With ever increasing house prices getting further out of reach of low-income earners and first time buyers, I wondered whether Guernsey is gradually entering a neo-feudal housing situation – where property and land are in the hands of a relatively few number of wealthy landowners who lease out to the rest of us.
Is it really beyond the imagination?
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According to Mourant Ozannes website Guernsey is made up of 28,000 parcels of land and 49,000 buildings so there is a way to go yet before your fears come true
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Fair point Ray, perhaps I’m being a little over-pessimistic!
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Paul, that was an interesting thought.
My first reaction was to look for statistics relating to rental and ownership, without success.
Secondly, I am not sure that such statistics would have a direct bearing on the issue because renting vs. ownership is potentially a cultural thing – rental being much more prevalent in France, for example.
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So Public Servant because I am an accountant who doesn’t work in the much maligned finance industry, I should pay more tax than you?
I find your comments offensive. Even if I did work in finance, why should I pay more? Why don’t you EARN more and STOP moaning about us professionals, when you don’t know the meaning of the word!
I studied very hard for what I have and I work long hours in a stressful job. Because of this, I don’t need recourse to public funds, perhaps you should ask yourself why you do?
Then again, if you really are a public servant, I’m sure you don’t work very hard anyway :)
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FIRESTORM. Unfortunately your comment that most of the states members are retired businessmen (and women)is totally wrong, and that,my fiend is the crux of all our problems.The States exists in it’s present form because they receive salaries far in excess of their wisdom. Wisdom can only come with age and experience.
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David, I agree – I mentioned on a previous thread that if we maintained a relatively free market on property, Guernsey would likely have to undergo a cultural shift away from the British model of owner-occupier to a more rent-orientated one – a good example of which being France.
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