Guernsey Government Publishes Guide To Economic And Taxation Strategy

by Jason Gorringe, Tax-News.com, London

22 June 2007

Guernsey's Policy Council has this week distributed a leaflet to every household on the Island, explaining the basics of the government's Economic and Taxation Strategy.

Chief Minister Laurie Morgan explained that:

“It has become increasingly obvious that there is a knowledge gap among the general public as to what the Economic and Taxation Strategy is, why it has come about and most importantly how it is going to affect them. In order to help overcome this gap, a leaflet has been written and will be distributed to all households.”

The leaflet explains that under the 'Zero-Ten' regime, from 1st January 2008 the standard rate of income tax on company profits will be 0%, with only a limited number of specific banking activities being taxed at 10%.

As part of this “Zero-Ten” regime, the profits of regulated activities of utility companies, that is companies such as Guernsey Electricity and Guernsey Post, will continue to be taxed at 20%, in addition to the income from Guernsey property which arises to any Guernsey or overseas company.

The government went on to reveal that:

"There are two main reasons for adopting the “Zero-Ten” regime:

1. To remain competitive with other jurisdictions, including Jersey and the Isle of Man.

2. To meet international standards and obligations (in order to secure continuing access to world markets).

Most of Guernsey’s competitors have already made announcements to the effect that they intend to introduce a Zero-Ten tax system."

"The overall package of implementations is designed to ensure that Guernsey remains a good place for businesses to operate and to provide well-paid jobs, therefore enabling wages to remain high and to increase."

Addressing concerns regarding whether ordinary Guernsey residents will be obliged to pay more income tax as a result of the new regime, the States authorities explained that:

"The standard rate of income tax that you pay will not increase. Individuals resident in Guernsey will continue to pay a 20% rate of income tax on assessable income."

Turning to the proposed Goods and Services Tax, the Guernsey government announced that:

"Guernsey has decided not to implement a Goods and Services Tax (GST) at present. However, in June 2006, the States agreed that research should be carried out into the feasibility of introducing a GST in Guernsey, and the intention is to develop proposals for a system of GST, which could be introduced, if absolutely necessary, as part of Stage 2 of the Strategy."

"Guernsey is also closely monitoring the developments and impact of the GST system in Jersey, where it is intended to implement a GST in 2008, at a rate of 3%."

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