Jersey's financial sector fights to keep zero-ten tax regime

26 August 2010

The Jersey government has agreed to delay a decision on the proposed reform of its existing zero-ten corporation tax regime.

Jersey - along with Guernsey and the Isle of Man - is under pressure from the European Union to abandon the system, under which the large majority of firms pay no corporation tax.

EU member states consider zero-ten to be a "harmful tax practice" that hurts their own economies, and the EU's Code of Conduct Group plans to review all the crown dependencies' zero-10 tax regimes in September.

However, Jersey Finance has now issued a strong statement urging the State’s government to retain the zero-ten regime, or as much of it as possible.

The organisation says dropping it could damage Jersey's future as a financial centre. Thirty out of the 49 member firms who responded to a survey opposed any change other than minimal adjustments.

The Jersey Finance statement was a response to a government consultation paper issued in June. The consultation period was due to expire on Monday (30 August) but the government has now agreed to extend it for at least another two weeks.

Jersey Finance technical director Heather Bestwick said the government must "think carefully before any alternatives to zero-10 are considered".

The government's consultation paper in fact offered five alternatives, which include a flat rate of at least 10 per cent corporate tax, as well as complete abolition of corporate tax accompanied by a rise in other types of taxes.

The island's annual budget statement is due in October, setting a limit to delays. In the meantime corporation tax remains as zero-ten, and the government has promised that any changes will not be retroactive.

Sources

International Adviser

Jersey Finance

Jersey Finance (2)

Jersey Government (Consultation paper)