Senator Frank Walker, Jersey's Finance and Economics Committee President, responded earlier this week to the Isle of Man's announcement that it is considering the introduction of a zero rate of corporate tax for businesses based on the Island.
The Jersey Evening Post reported on Tuesday that the IOM Treasury's 'elegant solution' to the problems posed by the European Union's Code of Business Conduct could have signficant implications for Jersey's finance centre.
However, commenting on Monday, Senator Walker attempted to reassure the startled industry, stressing that the proposal was nothing new, and that there is no need for anyone 'to be alarmed or panic'.
The JEP quoted Senator Walker as revealed that although a similar option has been considered by the Jersey authorities, there is no inevitablity about the Channel Island jurisdiction following suit, and no decision will be made on the issue until there has been extensive consultation over future fiscal strategy.
The Finance and Economics Committee President went on to observe that such a move is somewhat easier for the Isle of Man to make, as its corporate tax levels are already lower, and it relies on VAT for around 60% of government income, whereas Jersey does not levy any form of sales tax.
'The implications are very significant because we derive an enormous amount of income from what is effectively corporate tax,' the JEP quoted Senator Walker as observing. 'If we reduce it to zero without doing anything else, we will have a bigger gap in our finances than we have got at the moment.'
Senator Walker also observed that the Isle of Man's proposal highlights the farcical nature of the European Union's tax initiative, in that by removing corporate taxes completely, the Manx authorities are complying with EU rules whilst paradoxically making the Island more attractive to tax conscious businesses.
'It will no longer be harmful and meets their criteria but it does not achieve their overall objective,' he mused on Monday, adding: 'How does that help the EU to protect its own tax position?'
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