Critic Slams Guernsey's Tax Reform As A 'Subsidy For The Rich'

by Jason Gorringe, Tax-News.com, London

05 July 2006

Guernsey's tax reforms have been attacked by a pressure group for providing the banking industry with an unjustified subsidy.

Richard Murphy, of the Tax Justice Network, a pressure group of tax specialists and economists which opposes tax avoidance and tax havens, was reported by the BBC as stating that Guernsey's 'zero/ten' tax proposals are "probably the largest state subsidy that has been created by any territory in the world for a particular industry."

After many years of discussion, Guernsey's senior politicians in May officially proposed a set of economic and taxation changes that include a zero rate of corporate tax on the profits of a company's income, and a 10% tax for specific banking activities.

This is being justified by the government on the grounds that such reforms are essential to ensure Guernsey can compete effectively as an offshore financial services centre given that the industry is such a large component of the island's economy. Jersey and the Isle of Man are making similar moves.

However, according to Murphy, the tax reform and the anticipated GBP50 million revenue shortfall will bring about a "strange economic policy."

"To spend GBP50 million to basically subsidise the banking industry and its already very rich clients - let's be candid, that's what they are - is a very strange economic policy," he was quoted as stating.

Treasury and Resources Minister Lyndon Trott argued that the reforms will give the island its "very best chance" of maintaining its overall prosperity and that they will benefit taxpayers at all levels.

If approved, the main strands of the package will come into effect from 1 January 2008.

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