Guernsey's Treasury and Resources Department is set to launch a consultation into plans to introduce a lower income tax cap for the island's residents.
A GBP250,000 tax cap – the maximum amount of tax payable – was introduced from January 1 this year, but the Treasury & Resource Department's deputy minister Charles Parkinson has expressed doubts about its attractiveness, commenting:
"The tax cap is not competitive, so the Department is considering whether it would benefit the island to offer a more attractive deal."
The cap did not apply to Guernsey source income and was set at a level much higher than similar arrangements offered by Jersey and the Isle of Man. It is believed that the cap did not affect any existing Guernsey residents on its introduction.
A plan to reduce the limit and the qualification criteria was deferred by the Policy Council last year.
Treasury and Resources has received several representations that the rules should be changed, and has decided to consult with the intention of gauging if there would be longer term financial benefits in making a change – attracting more high net worth individuals to move to the island while safeguarding the island’s finances.
"I must make it clear that the Department is unlikely to support any proposal unless it was allied to a further proposal which would have the effect of making a variation of the tax cap revenue-neutral initially, and make the island money in the long term," Mr Parkinson added.
The consultation exercise also covers a broader review of the status of individuals classed as resident, but not solely or principally resident, under the Income Tax Law, and a possible further exemption from the ‘deemed distribution’ regime in relation to company trading profits.
The Department has outlined a number of options in the consultation documents, which has been issued to the island’s principal business accountancy and legal organisations.
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