Jersey Finance Gives Cautious Welcome To GST Proposal

by Robert Lee, Tax-News.com, London

17 February 2005

Jersey Finance, the body representing the jurisdiction’s financial services industry, has given a tentative welcome to the Goods and Services Tax proposals drawn up by Crown Agents on behalf of the States of Jersey Finance & Economics Committee.

Under the prototype system, a low general rate of GST would be introduced at 3%, capped for a minimum of three years. The tax would carry an exemption threshold of £300,000 to ensure that small and medium-sized businesses across all economic sectors will automatically fall outside the requirement to register.

Noting that the financial services sector accounts for between 50% and 60% of Jersey’s economy, the proposals have endeavoured to shield international customers of financial services from the impact of the new tax, although businesses in the sector will be expected to bear some of the GST burden directly.

Whilst the report observed that the taxation of financial services under the GST system is “inherently complex and presents a significant compliance burden for firms,” the prototype system seeks to minimise this compliance burden through a proposed “simplified treatment”.

However, as a result of this simplification, Jersey Finance noted that the finance sector, unlike other industry sectors in Jersey, will suffer irrecoverable GST or “sticking tax”.

Nonetheless, the proposal was broadly welcomed by Phil Austin, Chief Executive of Jersey Finance, who stated that:

“Clearly, we still need to see the outcome of the research being undertaken into the alternative tax proposals currently being considered by F&E before we can reach a final conclusion. However, if the States do ultimately decide to implement a GST system then the prototype system outlined in Crown Agents’ report looks like a good solution for Jersey.”

Meanwhile John Riva, Chairman of the Jersey Taxation Society and a member of the Jersey Finance working party which responded to the GST consultation, also welcomed the prototype system, noting that the new tax would go some towards reducing the island’s reliance on corporate taxation

“There is clearly still a lot of work to do in agreeing the detail of Crown Agents’ proposals. However, in principle we believe that the prototype offered in the report would be good for Jersey, and broadly acceptable to the Finance Industry,” Mr Riva remarked.

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