US-Guernsey Tax Information Exchange Agreement Comes Into Force

by Jason Gorringe, Tax-News.com, London

01 May 2006

The US Treasury Department revealed last Thursday that an exchange of letters between the United States and the States of Guernsey was completed on March 30, 2006, thus bringing into force an agreement that allows for the exchange of information on tax matters between the United States and the States of Guernsey.

This is likely to be viewed as another positive step for the Channel Island jurisdiction, which recently hit out at the UK media's perception of it as a haven for companies seeking to duck their tax responsibilities.

In a report published last month on the introduction of the zero corporate tax rate in the Isle of Man this month, in response to the EU's Code of Conduct on Business Taxation, the UK's Guardian suggested that:

"The Isle of Man is in a race to beat rival tax havens such as Jersey and Guernsey, which have in recent years slashed rates to lure the biggest share of the tax avoidance industry - money which mostly flows out of the UK."

It went on to add:

"Critics say that it is difficult to understand why the UK government continues to tolerate tax avoidance on such a scale."

Speaking to the Guernsey Press with regard to the article, however, Deputy Commerce and Employment Minister, Carla McNulty Bauer slammed the Guardian report, stating that:

"I was quite disappointed to find that the Guardian article was poorly researched and flippant in some of its observations."

The centrepiece of Guernsey's Future Taxation Strategy is a 'zero/ten' rate of corporate tax, under which Guernsey's businesses and corporate entities will be subject to income tax at 0% from the 2008 tax year (although businesses regulated by the Guernsey FSC will be taxed at 10%). The strategy remains to be confirmed by the States authorities.

Deputy McNulty Bauer told the GP&S that she expected this to take place in June of this year.

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