Jersey falls into line on Zero-10
Wednesday 14th September 2011, 11:02AM BST.
Europe has ruled that Jersey’s Zero-1o tax regime is acceptable with some minor changes, the island’s chief minister has claimed.
Senator Terry Le Sueur, in a letter to States members, said that the EU Code Group had accepted the island’s proposals to remove deemed distribution from the tax strategy,- following a previous statement from Europe and the UK that Zero-10 was ‘harmful’
‘This is excellent news for Jersey, and vindicates the consistent stance maintained by the Treasury Minister and myself over a long period,’ he said.
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What happens if Jersey find a competitor offering something which they deem to be “harmful” rather than healthy competitive business?
Who will force them to take action?
Differences are what help us make up our minds in life. I find it shocking why Jersey have folded and decided to toe the line so easily instead of telling them what they can do.
These are the first steps into being regulated by others more and more as time goes forward.
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I don’t think jersey have folded, they stood by their guns with the isle of Man, they appear to have made a few minor changes but it appears that 0/10 still exists for jersey and the isle of Man.
It is Guernsey who folded and jumped in all directions just to please the UK Treasury and the EU, bu saying they would potentially raise the corporation tax to, up to 10%. What are they going to do now? They have no option but to follow jersey and the Isle of Man and looking at a press release by Guernsey’s Chief Minister, he doesn’t appear to know where he is.
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Unreported: the Isle of Man’s Zero-Ten tax regime is going forwards, with Jersey’s, for approval (or not) by ECOFIN in December.
Both those islands’ governments are appearing triumphal, probably hoping that their populations will be fooled into thinking that Zero-Ten is a ‘good thing’.
Both those islands are running a budget deficit, which is not a ‘good thing’. Guess what – it means either tax increases or savage spending cuts, or both. Not much to celebrate about in reality, is it?
On the face of it one might think that common sense would prevail, and those two islands might follow Guernsey’s lead. Unfortunately, it’s not that simple. The Isle of Man’s deficit is primarily due to the withdrawal of the huge subsidy by the UK. The income they lose through Zero-Ten is relatively small, so they may calculate that if they keep the pressure on Jersey their intention to cripple the Channel Islands will be partly realised.
So it looks as if we have to wait till December’s decision.
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David Cranch your brief assessment of the situation the crown dependencies find themselves in re zero-10 is the best I’ve seen anywhere. Perhaps you’d consider posting it on the Jersey site, where most seem to be caught up in the triumphalism. Just like you, I see it as something of a Phyrric victory – if indeed it is confirmed by ECOFIN in December.
http://www.thisisjersey.com/2011/09/14/eu-thumbs-up-on-zero-ten-tax/
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Yes David Cranch
Also, the reason the ‘harmful’ deemed distribution section was in in the first place was as a local anti tax avoidance measure. Now that it needs to be removed, it will be possible for wealthy locals to park their income into company structures, make large profits, but never pay a distribution, and so not incur tax. When they feel like it, they will be able to ‘sell’ the company and take all the profit, there being no Capital Gains Tax. Effectively it creates a tiered tax system, worse than at present.
Jersey reckons it’lll lose £10M or so every year. This will have to be picked up by the those on lower incomes unable to take advantage of this obvious loophole.
ECOFIN may see this as untenable and push for a Capital Gains tax in all three jurisdictions, and so pull a key thorn. Of course it may not. But what about the UK?
The fact that Jersey is feeling triumphant about causing a further £10M a year burden on the population says something about the game, no?
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David Cranch & Arnald – exactly.
zero-10 has proved to be a gamble as far as domestic finances are concerned. Removing the deemed distribution aspect stops it being a gamble – by making sure that it is a guaranteed failure as far as domestic finances are concerned. I fail to see how they can afford to do this and I laugh at their underestimate of a loss of £10m per year.
I would much prefer to be in our shoes – accepting that zero-10 is unsustainable and moving towards a territorial tax system which is sustainable in the long run.
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But Terry, is Guernsey going to do that, it appears at present that we are just sitting on the fence and will follow whatever Jersey and the Isle of Man end up with. So much for zero/ten has served its purpose.
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Sam – I don’t see any basis for your claim that we are sitting on the fence and following Jersey or IoM. We were the only ones to declare that we were intending to scrap zero-10 and we have been actively investigating the introduction of a territorial based tax system. Other countries (inc UK) are moving towards a territorial system and so it should satisfy any critics, albeit that ours will be low-tax.
If we do a u-turn and follow Jersey in keeping zero-10 without the deemed distribution aspect, then I will be very disappointed and we will have a structural deficit. But I see no real reason to think that we will.
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