Guernsey Mulls Introduction Of VAT

by Robert Lee, Tax-News.com, London

19 October 2001

The 'This is Guernsey' news service has reported that the Island's income tax administrator, Ken Forman, has claimed that Guernsey may have to impose VAT in order to compete with the recent income tax cuts in the Isle of Man.

Mr Forman said that the Isle of Man had 'thrown down the gauntlet' to the Channel Islands by cutting back its income tax rates and introducing VAT. 'Guernsey needs to take stock of its position,' he said. A fiscal policy working group of the Advisory and Finance Committee is currently looking into the idea and aims to produce a report on its findings. 'We have some interesting times ahead,' said Mr Forman.

In agreement is Stephen Jones, Guernsey International Business Association (GIBA) chairman, who told 'This is Guernsey' that the biggest competitor to the Island's finance industry is the Isle of Man. But fellow GIBA member and KPMG tax specialist Jonathan Hooley said that although the Manx tax rates may appear more competitive on the surface, it was necessary to look at the whole picture.

Mr Hooley explained: 'A lot of finance businesses are owned by companies in the UK and are given credit for income tax paid here, but they wouldn't get the same credit for VAT costs. The message to get across is that the headline rate isn't the only relevant factor.' He also warned that if VAT was implemented it would be passed onto the Island's consumers.

States Treasurer Dave Clarke said that the fiscal policy working group had not yet presented any details of its findings to the Advisory and Finance Committee regarding the costs and benefits of VAT; however the group has described its remit as a 'formidable task' and said the report would be some time coming.

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