Jersey Holds Talks To Prevent £25 Million Tax Losses

by Ben Queree, Jersey Evening Post

09 March 2004

This story is reproduced by kind permission of the Jersey Evening Post at http://www.thisisjersey.com

Talks are taking place to win back £25m from the UK that would be lost by the proposed tax changes. If the Island moves to a zero-ten rate of corporate tax in 2008 - as proposed by the Finance and Economics Committee - Jersey will lose around £25 million in tax receipts to the UK Treasury, from UK-owned companies here in Jersey.

On Wednesday, Policy and Resources Committee president Senator Frank Walker raised the subject for the first time with Secretary of State for Constitutional Affairs Lord Falconer and Parliamentary Under-Secretary of State David Lammy MP at a meeting in London.

He said Jersey had a 'strong moral case' for the return of the funds, but would not say whether he felt the negotiations would be successful.

Under the proposed tax structure, UK-owned companies based in Jersey will not have to pay tax here. At present, the companies pay 20 per cent tax to the Jersey Treasury and that money is taken off the 40 per cent tax bill they get from the UK Treasury.

Under the proposals, the companies will pay all of their tax in the UK and will be no better or worse off. The shortfall to Jersey is worth an estimated £25 million and the Department of Constitutional Affairs have offered to act as Jersey's advocates in negotiations with the UK Treasury.

Senator Walker said that the talks would not be signed over to the department, but that he felt the talks showed the improving relationship between the UK and Jersey. "One of the consequences of the zero rate of corporate tax is that currently there is no identified way of getting tax from non-locally owned companies," said the Senator. "That is an unsatisfactory outcome. What we are looking to achieve is a situation where those companies continue to pay tax and thereby reduce the hole. We are exploring every possible avenue of doing that."

"The Department of Constitutional Affairs did not wish to be our point of access, but also wanted to be our advocate in more general terms relating to the UK government and I believe that is the first time in many, many years that we have had anything like such a positive statement."

The Senator added that he had also discussed Jersey's concerns about plans to extend the nuclear capacity at the nearby Flamanville station with Lord Falconer and Mr Lammy. The meeting was also attended by representatives of the States of Guernsey and the Isle of Man, and representatives of the four governments agreed to meet regularly in the future to keep the UK fully up to date with issues in the Islands.

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