Guernsey Consults On Business Tax Review

by Robert Lee, Tax-News.com, London

28 June 2010

The Guernsey government has announced the launch of a consultation on the proposed reform of its corporate income tax regime, to replace the zero-ten tax system currently in place and conform with changing international standards on business taxation.

The States resolved in October 2009 to conduct a review of its corporate tax regime. It has recently been publicly confirmed that, given Guernsey’s commitment to the review process with the presumption of the adoption of a standard rate of 10%, the EU Code of Conduct Group on Business Taxation (CCG) would not be conducting a review of Guernsey’s zero-ten regime.

The Guernsey government has however said that it would be conducting a review in a similar timescale with that of Jersey's on an individual basis. Like Jersey, the consultation is based on five proposals: the adoption of a territorial system of taxation; transparent treatment of companies for tax purposes; a residence-based system with repayable tax credits; a flat rate/residence basis tax; and the abolition of corporate tax altogether, with revenues recouped through other means such as payroll taxes, business licence fees or a greater emphasis on indirect taxes.

The public consultation period is to close on August 27, 2010, with feedback to be published by the government in the Autumn.

The Guernsey government’s publication of the consultation document has been welcomed by the promotional agency for the Island’s finance industry.

“Publication of the consultation document is positive news for the Island’s finance industry,” said Peter Niven, Chief Executive of Guernsey Finance. “It is important that we adopt a corporate tax package which maintains and indeed enhances the business flows into the Island and I am confident that this demonstrates we are making significant progress towards establishing a regime that is both internationally compliant and competitive.”

“The consultation document clearly recognizes the fundamental importance of tax neutrality to the financial services industry," he added. "This is extremely significant and reinforces earlier statements from the government that our funds sector will continue to be granted exempt status. It is clear that the needs of the different parts of the finance industry are being taken into account and therefore, however the general rate is applied, Guernsey will ensure that it retains its internationally competitive position in financial services.”

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