UK Treasury Runs Into Flak Over 'Designer' Clamp-down

Tax-news.com

09 October 1999

Jersey, the Isle of Man, Guernsey and Gibraltar reacted negatively to the UK Treasury's attack this week on so-called 'designer' tax regimes. The treasury announced immediate action against the regimes, known under different names, such as 'qualifying companies' in Gibraltar, whereby a company can pick its own tax rate so as to fall just outside the CFC (Controlled Foreign Corporation) rules that tax foreign profits regardless of whether they are remitted to the UK or not. Legislation to curb this practice will be included in next year's Finance Bill; in the meantime it is not quite clear what real immediate impact the Treasury's announcement will have, since it has no direct control over the tax regimes in the four dependent territories concerned. The announcement has got to be seen in the context of the whole 'unfair tax competition' battlefield, perhaps as a piece of 'communautaire' behaviour by the UK to make up for its wrecking tactics over the EU's withholding tax proposal. Although the dependent territories complained about the announcement, none of them said they would suffer much damage from it; mostly, this seems to be just an exchange of fire rather than a serious battle.

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