Jersey Announces Package Of Fundamental Tax Reform

by Robert Lee, Tax-News.com, London

18 February 2004

The government of Jersey this week announced a package of tax reforms, to be phased in over the next few years, as the jurisdiction seeks to adapt to an increasingly competitive financial services environment.

The main emphasis of the tax reforms will be a shift in the tax burden from companies to individuals after the government ushers in a proposal to slash corporate tax rates to zero, conscious that increasing regulation at the European level and competition from other jurisdictions threatens to undermine the central pillar of the Jersey economy.

Consequently, islanders will for the first time be faced with a sales tax from 2007 as the government seeks alternative sources of revenue to fill its depleting coffers. Other measures include the axeing of income tax allowances for households with an income greater than £80,000 per year, which will commence in stages from 2005.

Corporate tax income accounts for around 40% of the island’s tax revenues and lawmakers in the jurisdiction have suggested further measures will be needed to claw back some of this lost tax. A proposal for a new 10% levy on the profits of financial services firms could be met with a cool response from the industry.

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