Guernsey's Captive Insurers Welcome Zero Tax Rate Proposals

by Jason Gorringe, Tax-News.com, London

03 December 2002

Guernsey's captive insurance industry last week voiced its approval of the jurisdiction's zero rate corporate tax plans, welcoming the fact that the industry's existing tax privileges are retained under the new proposals.

Currently, the majority of captive insurers with no local business activities pay little or no tax. However, speaking to the Guernsey Press and Star, chairman of the Guernsey International Captive Management Association, Clive James revealed that failure to guarantee the continuation of the zero tax rate would almost certainly have led to leakage of existing business to other jurisdictions:

'It would not just have slowed growth, but we would have lost business,' he explained, adding that: 'There was concern that foreign and non-UK companies would also move to other areas where it would be better for tax. And new business would have dried up completely in favour of other domiciles.'

Mr James also praised the time scale decided upon by the Advisory and Finance Committee, observing that the switch - planned for 2008 - is far enough away to give the States some flexibility, but immediate enough to indicate to both the competition and international business and investment interests that the jurisdiction is committed to change.

Also speaking to the Guernsey Press late last week, Advisory and Finance president, Laurie Morgan confirmed that A&F had indeed taken on board the concerns of the captive insurance industry when making its decision:

'Those in the industry had told us, in no uncertain terms, that if they were taxed, there would be considerable leakage of existing business and no encouragement for new business to come here. Captives house the whole range of Guernsey financial services and post-11 September it has been a growth area. We are one of the leaders in Europe for this and we want it to stay that way,' he explained.

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