Population law is ‘economic suicide’ deputies are told

THE new Population Management Law, which comes into force in just over a month, is ‘economic suicide’, a businessman said yesterday.

populationmeeting
Guy Anderson, who organised the meeting with Economic Development, with a copy of the Population Management Law which he and others in the business community have fears about. (Picture by Steve Sarre, 17532196)

Guy Anderson was the organiser of a special meeting between a group of industry representatives and entrepreneurs and members of the Committee for Economic Development and staff from Locate Guernsey and other States bodies yesterday afternoon.

Mr Anderson felt the laws were unnecessary post-Brexit.

‘It is economic suicide and will cause a downturn in business and economic confidence in the island,’ he said. ‘Are we really being sensible by adding more problems to the current situation?’

Entrepreneur Zef Eisenberg said the effects of the new laws were already being seen across industry through ‘ever-worsening’ employment conditions

‘We are here as a group of passionate Guernsey residents and investors to explain the risks of the new population laws in finding adequate and quality staffing for our care homes, restaurants, hotels, law and accountancy firms, which before the proposal of the new population and open market laws wasn’t an issue,’ he said.

‘The room was filled with representatives for all these groups to explain the staffing issues that are happening right now as a result of these new laws. There are a lot of deputies who are unaware and oblivious to the threat that Guernsey is facing and it will only get worse.’

There were also concerns that there is widespread misunderstanding of the law.

Chamber of Commerce director Barry Cash said one of the main issues was the ‘complexity’ of the law and the problem that ‘a lot of people do not understand it’.

He said the meeting had been ‘constructive’ and had given different industries the chance to raise their concerns.

However, the director of housing control, Esther Ingrouille, said the incoming Population Management system would provide greater ‘long-term continuity’ and employment opportunities than the island has ever had previously.

‘One of the biggest criticisms of the current Housing Control system has been that people don’t understand how and why decisions are made. This is being addressed under the incoming Population Management system, because all the policies underpinning the day-to-day operation of the system will be published online.

‘The States also appointed an independent population employment advisory panel. The panel has just concluded its work, and has made recommendations about what types of jobs should attract different lengths of employment permit in the future. Once the final policy is published, this will give Guernsey businesses more certainty than they have ever had before when it comes to the likely outcome of applications for people to come to work in the island.

‘If businesses truly have a need for long-term continuity in roles that are strategically important to our economy and our community, they should contact their panel representative to make sure that information is fed back.’

Ms Ingrouille said the new laws tackled issues with the existing licensing system and said extensive public consultation had taken place to discuss business needs.

‘Probably the second biggest criticism was that the nine-months on, three-months off licence was no longer reflective of the needs of many local businesses,’ she said.

‘Under the new system, the equivalent permit will enable people to stay in the island for up to five years without breaking residence at all, if this is what the employer wants. For those businesses where the seasonal licence has worked well, they can still employ a person for five seasons. All of this gives a long period of stability to those businesses.

‘There are special transitional arrangements in place to manage the changeover between the two systems. Before those transitional arrangements were debated by the States, we held meetings with the business community so that they could understand the implications, and lobby for changes, if any were needed, before they were debated by the States.

‘We subsequently contacted about 2,000 businesses and held masterclasses so that they could learn about the new system, and about the transitional arrangements for current guest workers

‘Although it is disappointing to hear that any business has deep-seated concerns, the new system has to be one that works for the island as a whole, and there are many business sectors that have welcomed the changes.’

Economic Development president Deputy Peter Ferbrache said the new laws would definitely go ahead, but left the door open as to whether they could be revised post-implementation.

‘We had a very constructive meeting with representatives from different parts of the economy and society,’ he said. ‘The new laws will certainly come into effect [on 3 April], but what happens after that will depend on a number of factors.’

Comments for: "Population law is ‘economic suicide’ deputies are told"

100% Donkey

Whilst we all want our economy to be both strong and robust, Guernsey is an Island home, not a business park (as some would like it) !!

CAT

In order to have a robust economy we need Guernsey to be both a home and a business park. We moved to Guernsey 20 years ago intending to make it our home and to relocate a significant part of our business here. After a couple of years we realised that the difficulties and high costs of recruiting and retaining suitably qualified and experienced staff made full relocation impractical and unsustainable.

Most of the businesses who are concerned about sustainable staffing are service industries such as care homes and the hospitality trade. These are staff we need in order for our island to be a comfortable home.

100% Donkey

CAT

With respect moving to an Island 25 miles square was always going to present recruitment challenges. We cannot turn this Island into a concrete jungle just to accommodate business.

I agree that a practical solution has to be found but there are already too many people here and there is little support for further immigration.

markB

Its all very well and good , but these Entrepreneurs and business men making a killing over here can or will bog off when the going gets tough and leave us to pick up the peace's, our dear Tom Scott did just that and went "to" Jersey.

Donkey Boiler

All those calling for a free for all on immigration need to say what they think the population should be allowed to rise to, 80,000?, 90,000?, 100,000?

Also, to put forward plans for housing, hospital extensions, and increases in all the services that this huge population will demand.

It is always the wealthy that demand limitless population growth in order to line their own pockets. That is easy to do when living in the lap of luxury in the rural seclusion that will not be affected by the population explosion. That will be endured entirely by the plebs who already live in the most densely populated parts of the island, who will see their quality of life eroded further.

InteresTed

You can only kill the fatted calf once. Don't rip off the people already here.

Beanjar

It seems strange that whilst the States are making a big deal about building '90 affordable homes', some people want virtually uncontrolled immigration. Those who make the loudest noise are sure to be those who exploit cheap labour or rent property, quite possibly both.

GSYcow

The SOG are trying to control the population through housing control. In the Soviet era the Communists did the same!

We are having our property rights completely removed with "housing inspectors" appointed to make sure we are complying to the new law. More Civil Servants no doubt on 100K.

Are any of you aware of who can live in your house and who now will NOT...

See Blue Boxes in link.. Do we want to be so controlled ... ?

https://gov.gg/CHttpHandler.ashx?id=105186&p=0

This is not so much about immigration it is about MORE CONTROL of US and removing OUR rights.

davegorvel

With the wisdom, feeling and interest for the island coming from Zef Eisenberg, Guy Anderson, Guy Hands and Barry Cash all good Guernsey boys from Britain.

I can now sleep in my bed like a log without worries.

Perhaps because of our housing laws it could be said like Auistria,New Zealand and Canada

davegorvel

With the wisdom, feeling and looking after our interests for the island coming from Zef Eisenberg, Guy Anderson, Guy Hands and Barry Cash all good Guernsey boys from Britain.

I can now sleep in my bed like a log without worries.

Perhaps because of our housing laws it could be said like Australia, New Zealand and Canada Guernsey is a safer place to live.

It always amazes me that some people come from Britain who are glad to get out but then want to change this island into a little Britain.

Well they can if they wish go to back to the bigger one then wonder why so many voted for Brecxit and it maybe uncontrolled immigration is the answer.

As Peter Ferbrache said the laws may have to be tweekt

davegorvel

Sorry seems to go though on its own. Last word tweaked

Runs with Scissors

To be honest I think even if they relaxed the law completely and let anybody from anywhere in the world come and live and work here if they want to I still don't think we would see a huge population increase.

The younger generations seek diverse career opportunities, a metropolitan lifestyle, easy access for travel, plenty of choice for eating out, where to live, what to do etc. Many now research what it might be like to come and live her on a 3 / 5 / 7 year licence, and they choose not to come.

Even when the salary and relocation packages they are being offered are very generous (more than their local contemporaries are taking home that's for sure), and to book a lower social security rate by nearly half, and a flat tax rate of 20%.

If I was a 25 year old professional, being offered a job in Guernsey with more money and less tax I would find it tempting. But then I'd realise the cost of renting is on a par with London, and the cost of buying is on a par with the most of the SE of the UK. Couple this with the cost of living, which is much higher than everywhere else in the UK, together with having naff all to do in the evenings and weekends... it's not hard to see why we cannot attract people to come and live and work here.

Guernsey has become a retirement castle. People move here in their later years to live in the higher parishes in their 6 bed farmhouses. And when they get older and need to be closer to grandchildren and children who can help look after them, many return to the UK. They pay tax on their income, but many don't have large incomes coming in, and many structure their affairs so they are under the personal allowance and the rest of the time living off tax free capital gains. It is a joke. We throw the doors open for these people believing them to be the golden goose, but the little they pay into the system would make most of us very angry if we knew.

Much is said of the population 'timebomb' and how the older generation are going to outnumber us very soon. However, how long do we keep the pyramid system going? If the system only works with more population paying in at the bottom, to support those at the top of the pyramid - well you hardly need a degree in economics to realise that this doesn't work. Eventually you run out of land and jobs, even if the population does increase.

Perhaps it is time that we stopped the Old Age Pension and agreed that from a certain date no-one is getting it. Controversial I know, but what other long term solution is there? We could do a reverse China and insist that all local people have at least 4 children each, and then insist they don't leave the Island?

Donkey Boiler

RwS

Your comment about having a compulsory number of children is proably a bit radical. However, you have a point about old age pension. It's a con. When it started, what you paid was for your own pension. Now, we're told that it's the present working generation that pays the pensions of the retirees, and so on. This is just because the States have mismanaged the funds over decades, squandering it on the idle and feckless.

GM

Runs with Scissors

You are right about the Open Market. I've always believed that there should be a minimum amount of tax paid for the privilege of living here. Obviously this could my met (fully or partially) by tax on earned income here if they work here, but overall there should be a minimum level of contribution to the income tax coffers. Somewhere around £40,000 a year strikes a note.

Beanjar

If somebody decides to move here into an OM house costing, lets say, £1 Million the first thing they do is pay £30,000 document duty tax. How many years does it take you to contribute £30,000 tax? Quite a few I'm guessing. To my mind trying to deter HNW individuals from coming here is just irrational, short-sighted jealousy.

GM

Beanjar

Somewhat less than one year actually, but that's irrelevant. I'm not trying to deter HNWIs from coming here at all - in fact completely the opposite. I just think they should make a minimum tax contribution, regardless of whether it comes from earning it actively on-island or passively from off-island.

I assume you do realise that Open Market residents can and indeed do come here and rent a house without buying one, so that no document duty is payable at all? That £30,000 document duty to which you refer wouldn't be generated at all.

McTavish

GM, have you seen the price of open market rentals? You would need a substantial (and therefore taxable) income to afford to rent a decent house, on top of which the landlord will be paying tax at 20%.

GM

McTavish

I'm very well aware of the level of Open Market rentals. It's currently a rental yield of between 3.5% and 4.5% of the value as a benchmark.

But you're missing the point. New Open Market resident has £2m available to buy an Open Market property. If he buys then he pays a lot of document duty on a £2m house. If he chooses to rent instead, then he uses up £70,000 of his capital to pay the annual rent. No document duty payable as there's no purchase. No income needs to be have been earned and taxed as he's using his capital not income to pay the rent. Yes, the landlord suffers tax on the rental income but the new Open Market resident is paying no income tax at all and has not contributed to the Guernsey coffers at all. It is undoubtedly possible and I know people who have done exactly that. Is that fair? Why should they not have to pay a minimum amount of local tax in order to come here on the Open Market?

McTavish

GM, what you describe is technically possible but, IMHO, it is highly unlikely that someone would have £2M+ of capital and no income whatsoever from anywhere in the world. And even if they did, what would be the attraction of moving to Guernsey? If they have no income and are happy to just eat up their capital, there are cheaper places to live and they wouldn't pay tax in the UK or wherever they are from anyway.

GM

McTavish

I'm aware of at least two who did exactly that. Their money was invested in projects which paid no income but which were focused entirely on making capital gains which as you know aren't taxable here.

In any event, £2m in cash would generate less than £15k interest these days. They get a personal allowance / married persons allowance here which would wipe that out to leave no local tax liability.

Beanjar

GM, you say that you pay £30,000 tax in "Somewhat less than one year actually..." So presumably that means you are earning considerably more than £160,000 a year, very nice too. Is your accountant not aware of the £30,000 tax cap though?

Beanjar

Sorry, GM, I have to take issue with your talk of Income Tax avoidance schemes. That is not my experience. Unless you are talking about some kind of pension or life assurance based investment, which are available to everybody, the tax people here are very hot on 'roll-up' type investments. They invariably treat them as Income even when they would be subject to Capital Gains Tax in the UK.

I know you are trying to make an argument but you really seem to have it in for OM dwellers. Don't forget that many people who have moved into the island's OM properties have been incredibly beneficial. Near the top of the list must be the Perkins family who have created vast amounts of employment opportunities and paid huge taxes since 1984.

Perhaps you should think more of them and less about this odd character you have in mind - the guy who willfully has no taxable income, yet somehow manages to pay £50k a year rent whilst, presumably, living on fresh air. He doesn't exist!

Runs with Scissors

Beanjar

Please bear in mind that a significantly large chunk of the open market changes hands by transfer of shares in a company that holds the house - so no document duty I'm afraid.

And your point about how long it takes to contribute £30,000 of tax, is just ridiculous. Lots of local people pay plenty of tax and social security, some of which the amounts would make your eyes water.

McTavish and Beanjar

You think it is unlikely that someone would have £2m of capital and no income upon which to levy income tax and social security? Incorrect. Very many individuals here structure their affairs to live off capital gains, or capital drawdowns of loans they made from themselves personally to a company. Very little personal income or company income tax is paid.

The more 'wealthy' the person is, the more likely it is that they have their affairs structured in this way.

None of this is petty jealousy. This is just an exercise in trying to educate the masses that HNWI's and our drive to attract them here is not bringing in half as much tax and social security as they would have you believe.

McTavish

GM, the number of people for whom the type of structure you have described is feasible, effective and desirable and who are also interested in living in Guernsey is extremely limited and I am simply saying I don't believe it is a widespread or growing problem that would warrant a legislative response.

I also do not see that it makes much sense to rent an open market property as a strategy to avoid document duty, as the cost of renting in most cases would exceed the document duty fairly quickly. I also wouldn't get hung up on who pays the tax on the rental income - in the situation you have described tax is being paid as a result of someone coming to the island and bringing the cash with them to pay their rent and their on-island living expenses and I would regard that as a positive result.

Beanjar

Sorry, RWS, I'm not convinced. Why or how would anybody pay more than £30,000 per year in Income Tax when that is the cap? Please tell me how many OM properties are bought as companies rather than through paying the Document Duty tax. I don't believe it to be many. I know a number of OM owners, none bought as a company. Although in one case, they made it into one subsequently (after paying the tax) for inheritance reasons. No tax saving there, in fact they pay additional taxes and fees every year.

So, sorry, without some hard statistics I will not accept your view that OM properties are occupied by Scrooge like characters whose sole aim in life is avoiding tax. Believe it or not, there are better jurisdictions to do that in, with cheaper houses and better weather. But I am, as always, willing to be convinced if you have anything better than vague feelings, prejudice and rumours.

Quite apart from anything else, do you take our Tax office for fools? In my experience they are at least as grasping as their counterparts elsewhere. Pray tell, why are we wasting a fortune trying to attract HNWI if Guernsey is such a nirvana for rich freeloaders? If your view was correct we would be needing to beat them off with a stick!

Runs with Scissors

I think you might find that the tax cap on income from all sources worldwide is £110,000 for Guernsey source income and £220,000 from all worldwide sources.

So I'm afraid there certainly is an incentive to drive wealthy individuals to structure their affairs in a way in which they can live completely tax free off of capital.

I believe that in the last 18 months or so Gavin St Pier indicated that only about 30 or so taxpayers were taking advantage of the tax cap. And I would proffer that of course this isn't due to us not having significant wealth among us, but is of course due to a capital income stream being created.

The Tax Office are indeed nobody's fool and are well aware that the wealthy can settle their assets into a company, and then draw down on the loan as 'capital' without needing to pay any income tax. This was one reason for the deemed distribution regime that existed from 2008 to 2012. It was scrapped at the end of 2012 as was not 'EU / OECD' compliant.

Well, as for those purchasing an open market property via a company, I certainly deal with plenty of them every working day. And it is one of the most frequently asked questions by HNWI's coming to the Island.

My experience may in your words not be backed up by proof that I can share with you, but I assure you that it does not spring from rumours.

McTavish

RWS - I believe it is actually £220,000 all sources, with the £110,000 cap on non-Guernsey income and no cap on income from Guernsey property.

As far as property purchases by share transfer go, I do not understand why this has been allowed to continue for as long as it has without attracting some sort of tax charge.

GM

Runs with Scissors @11.26am

You are quite right. It is common for wealthy open market residents to have Jersey based structures (and vice versa) which are set up before they become resident here, and which are designed to produce non-taxable capital receipts.

McTavish @12.38pm

You are overlooking the opportunity cost from not tying up one's capital in a house. Why buy a house for £2m and miss out on investment opportunities? Better to rent and back yourself to generate a better than 4% return.

Beanjar @9.21am

The £30,000 tax cap only applies to those who are not solely resident in Guernsey.

Beanjar @9.49am

There are numerous structures involving trusts and companies which are resident in Jersey, established prior to becoming resident in Guernsey, which result in non-taxable capital receipts. These are widely used by new open market residents. And no, I don't "have it in for" open market residents at all. Far from it. But I don't like the sort of planning via Jersey structures that I've outlined, resulting in no tax being payable here. As for your last paragraph you are categorically wrong. They most certainly do exist.

McTavish

RWS - how on earth have we "thrown the doors open" for older incomers? To be here you either need local status, a job with a license or to buy an open market property, of which there are only about 1,700 units and therefore work on a "one in one out" basis. And if, as you claim, some return to the U.K. when they need additional care, surely this helps the island as they are not making use of the secondary health system or social services at taxpayers expense.

FWIW, I think your first four paragraphs were pretty much spot on.

Runs with Scissors

McTavish

The open market itself tends to attract those in their later years, is what I meant.

You don't get too many millionaires in their 20's or 30's coming here to relocate.

Those who have made money in business in the UK, or inherited family wealth, tend to be in the age bracket of about 45 at the youngest up to in their 70's and 80's.

That is what I meant.

McTavish

To be fair, the local market doesn't seem to attract many youngsters these days, either - but that's more of a reflection on the amount of time it takes to save up enough of a deposit.

The Open market is not all about the very wealthy - at the more modest end of the price scale there are properties occupied by professionals who (amongst other things): are entrepreneurs running local businesses, paying taxes and employing locals; work for businesses that are unwilling or unable to get them a 5-year license for whatever reason; have a family connection to the island but don't meet the exact criteria for local status; did have a 5-year license and, having made Guernsey their home, have bought OM in order to stay and bring their Guernsey-born children up here.

GSYcow

well said - Run With Scissors

We ALL need to find a way to pay for our futures and if the situation stays as it is there is NOT going to be enough money as we all get older greyer more infirm and the amount of tax being paid gets less and less. We need to encourage our children to have more children who will then be educated here and more importantly staying here and paying taxes to fund our State Pension and provide and pay for our care in our old age.

We ALL have to accept that either we pay a lot more tax,, retire a lot later or cut States spending dramatically (yes please! any suggestions?) as well as attracting more taxpayers - either our children and grandchildren or more outsiders. Probably all of the above will have to take place and the longer we leave it the worse it will be. Yippee we had a surplus this year (which no doubt will be recklessly lost or spent on some vanity project). The States needs to be running a surplus far greater than this each and every year for the foreseeable future to pay for us all.

We should ask our Deputies (well civil servants) to be honest with us and explain how we are going to pay the future and not ignore it.

Some thoughts for the States:

a) a second pension run administered by third parties NOT under States control that we can pay into and/or;

b) those of us that don’t draw any benefits we’re entitled can to add them to our pension pots and/or;

c) For all those that delay drawing their pensions this is added to their eventual pot;

d) that the pensions can be passed down the generations for our children to benefit from.

e) A massive cut in spending and what this is going to be - what is going to be cut and how much this is going to bring in and where this surplus is going to be held for us the taxpayer.

f) Tax increase - where what how and likewise where the money is going to be held NOT spent.

I'm no specialist so correct me if I’m wrong but even I recognise if there is not enough money now, with less taxpayers this will only get worse.

We cannot keep ignoring the Demographic time bomb - only 1.5 children are being born on the island to each family so future taxpayer numbers are reducing – so less tax revenue= less spending.

However the extreme removal of our property rights and unnecessary POLICE STATE tactics being forced on us by Housing will further put people off coming. We all need to understand the consequences of this new law as it won’t become apparent for a couple of years and by that time its too late, the damage has been done.

Joe

It’s with great regret that these people and many others such as the Portuguese community did not attend, when the State’s Population Management Committee called a meeting at Beau Sejour last year, which was presented by the former president Mr. Paul Luxon and his team in order to explain the new population management project, before the approval of the Law in parliament.

Unfortunately the meeting was attended by a small number of Latvians as well as the Consular representative and two Portuguese, an insignificant number of entrepreneurs of the hospitality industry, when in reality the room should have been represented by several business sectors, in which they could conveniently take advantage to have a clarification or question about a number of clauses not understood about the new Law.

PLP

I won't pretend to be an expert in any shape or form but I strongly believe the discussion needs to go beyond simple fiscal economics and consider social factors such as quality of life.

The problem for a small island like Guernsey will always be attracting income streams that don't require huge workforces. The finance industry ticked that box to a point and there's no doubt many - including me - have benefited from the high-octane capitalism it brought but it has come at a cost.

There may come a time where Guernsey has to decide to either embrace population growth accept an economic hit in order to preserve its unique environment - or strike a balance between the two.

GSYcow

Dear All

Being new to this could someone explain to me why when I am logged in to my GP account my posts are seen by me (are they by you) and yet when I am not logged in I cannot see them??? Is there some form of censorship going on. Nothing I have said is either abusive, offensive, radical or rude. Am I doing something wrong???

Banned again!

Nothing unusual. There may be a reason or there may not be a reason.

Island Wide Voting

GSYcow

Posts seem to take a different time scale to load up on certain days ... and seemingly dependent on the phases of the moon occasionally

I quite often hit the submit button twice to check that a post has gone through in order to receive the 'it looks like you've already said that' confirmation

Paul

Some posters need to review the housing stats for open market. Values have been static at best for over a decade which is mainly due to There being no appetite for newcomers to come here. Lots of reasons for that of course, avoiding paying tax in Guernsey would not be one of them, if you are wealthy you would want access to a lot more amenities than are here. The quality of housing represents poor value for money. GM suggests putting yet more obstacles in the way via a minimum tax , would that be for existing residents as well. What about locate Guernsey who seem to be offering local licences circumnavigating the open market completely. The open market is all but dead with no realistic chance of that changing anytime soon unless something happens elsewhere to make Guernsey seem a more viable place to live.

Beanjar

I quite agree, Paul.

GM

Paul

I agree with most of your post.

However I'm not trying to put more obstacles in the way of the open market. I would merely like to see some open market residents contribute at least some tax locally.

You've hit the nail firmly on the head in your last sentence. We need to make the island more attractive to potential new open market residents.

Beanjar

So GM, "not trying to put more obstacles in the way of the open market", eh? But earlier, you said "there should be a minimum level of contribution to the income tax coffers. Somewhere around £40,000 a year strikes a note".

In other words with interest rates at under 2%, anybody moving here to retire, which a great many OM occupiers do, needs an income of £200k, all of which will be taken in tax. They will need savings of a mere £10 MIllion to produce that every year. Then they can sit back, relax and watch as their dwindling resources pays a further enormous amount for social security, pays their £50,000 rent and then get on with the business of day to day living. Or, far simpler, just move somewhere more appealing. WHICH IS EXACTLY WHAT THEY ARE DOING ALREADY, without your punitive new measures.

Quite simply, you are deluded. You have clearly got a bee in your bonnet about this, but you never answered me earlier - if Guernsey is such a desirable millionaire tax-haven, why are we spending money trying to attract them and not beating them off with a stick?

Beanjar

Sorry, That should read "£40k of which", not "all". Instead of making everybody in OM guarantee to pay £40k in Income Tax, however little they may earn, why not introduce higher tax bands for all high earners?

One thing I don't understand GM, is why you perpetually want to single out OM dwellers for your 'special measures'? They already pay through the nose for a house on an island that will never truly be their home. Whatever they may contribute to island life, they will only ever be able to live in one of 1600 houses, many of them decrepit. If their 'en famille' or financial circumstances change they may well be out on their ear. No wonder Locate Guernsey are up against it!

If people are, as you say, avoiding income tax by drawing down capital and never having an income, then why not change the tax laws? For everybody. Or is it just wicked OM dwellers who supposedly do this? Are you aware that our tax people already deem certain investment returns 'Income' which would be Capital Gains in the UK? Because we don't have CGT, do we? Wouldn't it be more honest to just introduce it, but maybe at a lower rate than the UK? In fact, our Tax office don't even need more laws because they are already judge, jury and executioner in all matters relating to tax. They, quite literally, make it up as they go along. Trying to get a straight answer from them, about anything, is like trying to pin jelly to a wall.

I really don't understand why you seem intent on stymieing Locate Guernsey's efforts, it seems petty and illogical to me.

Runs with Scissors

Beanjar

The rules surrounding living off capital gains, rather than income streams, will only change if a form of capital gains tax is introduced. I agree, this would need to apply to everyone.

To add some balance to my open market and HNWI bashing, it's a darn shame we have not had a decent capital gains tax here since the 1980's when the Island began to boom. If we had, house prices might not have risen to the ridiculous bubble we now see, and of course there might still be money in the coffers at Frossard House, rather than a gaping black hole. (That £15m is an anomaly or pure fluke, so I'm ignoring that deliberately).

Most posters on here are not trying to have a 'go' at people moving to the Island, or make them pay through the nose if they are coming - most are trying to shed some light on the rabid PR that comes out of SOG and Locate Guernsey about how so very appreciative we should be when someone fresh off the boat turns up with a fiver in their pocket.

Guernsey is bloney choc a bloc with accountants, and tax advisors, and most know full well that even if people moving here do generate some economic activity, they also know how to ensure how to keep it ALL from the tax man.

I think what frustrates those living here is that people move here to escape CGT, IHT and punitive IT rates in the UK. But then even with our nice friendly 20% rate, they still want to pay less and less and less.

I deal with HNWI everyday, and I can assure you I have at least a few dozen clients who pay less tax than me. FACT.

GM

Runs with Scissors

A capital gains tax solely on residential property (I'd prefer to call it a residential property profits tax rather than a capital gains tax) would be a good way forward.

We could do like the UK has done and revalue all properties at a certain date (day 31/12/17). Gains accruing after that date would be taxable. Assume it's at 20%, with the rate reduced by 1% for each year of ownership. Tax-free after 20 years. (Or maybe reduce by 2% per annum over 10 years and so tax-free after 10 years). It would generate tax revenue, would perhaps slow down the price growth a bit, and the tax raised could be used to provide funding to assist first time buyers with their deposits via a loan scheme.

I agree totally with your last 4 paragraphs.

jjlehto

GM

Doesn't the UK tax just deal with property owned by foreign owners, whereas you seem to be suggesting it should apply to all home owners here? If applied to non-principal residences here then it couldn't definitely be of help but I am not sure there would be much appetite if it applied to every home owner.

McTavish

GM, I would imagine that any GCT regime we introduced here would exclude gains on your principal private residence, same as the UK and many other countries, so whilst this might generate some revenue from private landlords it wouldn't bring in any extra cash from OM owner occupiers.

Rupert Walthumstow

So GM you would target young families with your tax and further deter them from buying property.

Imagine a young couple in mid-20s early-30s who might want to buy a small house with a view to moving up the ladder in a few years when they start a family.

Property prices go up a bit and they make a bit of profit. BOOM you tax them so they can't afford to move up any more (especially given all the fees they will have to pay).

Meanwhile an old couple who downsize having purchased their house thirty years ago sell for a massive capital gain and pay no tax. Or a family in their late 30s now who have purchased and move in ten years time to a big spanking house as they hit peak earning and again pay no tax on their gains.

As jjlehto says, some form of tax on people with more than one property locally, particularly those with buy-to-let empires, would be very helpful, but taxing young families is just going to push them away and make the problem worse.

GM

Beanjar

I've said it several times and I'll say it again because you seem intent on ignoring it. I am NOT in any way against the open market. I simply am against open market residents coming here and paying next to no tax. The open market was originally designed to generate tax revenue from wealthy non-qualified residents.

My notional £40,000 figure should perhaps be better defined as per household, as opposed to per person. Call it a "fee" if you like, to the extent that their actual tax liability falls short of that figure. Maybe it should be £25,000 or £30,000, but it shouldn't be zero in my view.

I didn't follow your maths so I'm glad you've corrected it below.

I'm not deluded and I certainly don't have a bee in by bonnet. Like Runs With Scissors below, I know multiple wealthy open market residents who pay far less tax than huge numbers of local market residents. We need economic contributors.

If we were to introduce higher rate bands for all earners then we'd probably lose many of the open market residents who do actually pay a lot of tax here.

Your portrayal of wealthy open market residents living in an island that will never truly be their own home is absurd. I know dozens of open market residents who came here in the 1990s and later and it is very much their home. They'll never leave. Yes there are far too many decrepit open market priorities that are extremely unattractive to incomers, and they are on the threshold of being suitable for de-registering to the local market with minimal financial loss in order to sell them.

Changing the tax laws to tax capital gains would be a major own goal. The absence of CGT has attracted many open market residents here, although the changes to the UK tax laws has reduced some of the historical CGT planning which drove the open market here for several decades. Low income returns for the past decade have also made it a bit less attractive to move here for income tax planning reasons. By far the biggest attraction now is the absence of IHT here, and the still relative ease of shedding one's UK domicile after 3-4 years here by severing links with the UK.

I am extremely well aware of the way that the local tax office treat certain investments generating capital gains as "income". It is easily circumvented by using appropriate structures based in Jersey, set up before becoming resident here.

I'm very keen for Locate Guernsey to succeed although I don't envy the scale of their task. For the right people, Guernsey is a great location but Jersey are light years ahead of us with their well-oiled machine for attracting new residents. Locate Guernsey have 20 years of catch-up to do, with a tiny budget and with our various States departments not exactly rolling out the red carpet to attract new residents looking to set up businesses here. It has improved a bit lately, but I know people who have been looking at moving to both islands and Jersey win hands down on most occasions. Guernsey wins where the person wants to be lower-key and doesn't want to show off their wealth. Jersey attracts those who want the "tax exile" profile.

I'd throw an extra £1m a year at Locate Guernsey for the next 3 years and give them a real chance to pull on a few more wealthy open market residents, but let's get more co-ordination from the key States departments, and let's ensure that those who come do actually make an ongoing contribution rather than merely a one-off document duty on a house purchase (avoided if they rent). A £50k document duty but no annual income tax paid equates to just £2.5k a year annualised benefit over 20 years. Is that what we want?

Beanjar

GW & RWT, it is hard for me to refute your description of a few OM misers who are desperate to find ways to avoid paying tax. If these are people you have met in the course of your work, all I can suggest is telling them of your feelings, changing your jobs or dobbing them in to the tax authorities and trying to get the system changed. But I fear your involvement with these few people has distorted and soured your view of how the majority operate.

I know quite a few OM residents through sports clubs, societies and voluntary work and see them in a completely different light. Believe it or not, I am probably the most sophisticated amongst them financially! Far from them cleverly avoiding tax, most of them are reeling from having virtually zero interest when they were regularly receiving 5-10% on fixed term savings when they first came to the island. It is as much as I can do to get them to overcome their loyalty to banks generously giving them 0.1% interest, split their money and secure some relatively decent rates in the short windows that they are available.

The tax office can, and do, call virtually any monies received 'Income'. You are naive if you think they observe the CGT rules as applied in the UK. I know of cases where they have chosen to ignore many of the 'rules' people have relied on. People improving properties and moving on after several years can be told they are serial developers. People who have a share portfolio told they are 'traders'. People making a profit on selling an investment told it is 'Income' but not even allowed to offset those on which they have made a loss.

So I'm not saying you're making it up but I cannot believe that the few people you have met are in any way representative of 1600 OM owners. I feel it would be unfair and divisive for the general population to be left with that impression. And I repeat, for the umpteenth time, "if Guernsey is such a desirable millionaire tax-haven, why are we spending money trying to attract them and not beating them off with a stick?"

Runs with Scissors

Beanjar

Whether income is 'income' or 'capital' is subjective depending on the nature, frequency, and size of transactions. The same governing principles are in place in the UK, but there are more instances and guidelines surrounding the area to govern on making a decision either way.

However, you are correct on one thing. If our tax office deems a gain to be income, they get to tax it. If they deem it to be a gain, then it's tax free. So there is clearly more of an incentive to bend and shape the interpretation of case law towards income wherever possible.

I think we agree on one thing, as do many posters to this thread. There isn't much that is going to attract OM or LM individuals to this Island. The elephant in the room seems to be that nobody much fancies living here, HNWI or otherwise. On that we can agree surely?

I'll repeat what I said a few days ago, even complete deregulation of our housing and right to work controls wouldn't improve the problem!

GM

Beanjar

Sorry but we aren't talking about just a few OM residents. I'm pretty sure we are talking about the wealthier ones, i.e. the ones from whom we should be generating more tax revenue.

Re the Income Tax Office's stance to treating capital gains as income, there is only one reason that they get away with it - because not enough taxpayers are willing to formally appeal against their stance. When they get to the courtroom steps and know that English case law re definitions of capital gain and income are going to be thrown at them they will quietly cave in rather than publicly lose the case. They rely on most people not being prepared to take them all the way.

Yes, sustained low interest rates have massively affected many long-term OM residents. I know one who retired from the armed forces with a pension many years ago and with what he thought was a decent sum of capital, which was then earning around 12% per annum in the bank. He's lost 95% of his income, the house in a bad state of disrepair so he would struggle to sell it, and can't afford to fix his windows or gutters. There are quite a few like that.

I don't think that Guernsey is such a widely attractive "tax haven". It appeals to some who want a certain type of low-key lifestyle. Jersey attracts those craving more attention, but their system is very different to our open market and they only a fraction of the equivalent of our Open Market residents. Places like Malta and Cyprus are very attractive to many, while remarkably Italy now has its own "non-Dom" tax laws which will attract many. With good tax planning even France and Spain can be fiscally attractive.

Beanjar

GM, does your friend/client the retired ex-serviceman know you want him to pay a minimum of £25-40,000 Income Tax per year in future? I would like to be a fly on the wall for that conversation. When his saving are gone, what then? Sling him out on his ear? Did anybody have the vaguest inkling ten or twenty years ago that interest rates could drop so low for so long? Or how long they would live?

Yes, "There are quite a few like that". Which is why I am so unhappy that the tone of your posts suggests that they are outnumbered by devious OM tax-dodgers, a stereotype I do not recognise. But where they do exist, the Tax office has all the weaponry to deal with them. As I understand it, 'Income' is virtually anything they deem it to be, completely at their discretion and they can disregard UK case law whenever it suits them. And it doesn't matter how clever the scheme is, they can still call it 'tax avoidance' and subject it to Income Tax.

I am all about transparency, I hate the arcane practices of our Government and a Tax office which regularly makes it up as they go along. Particularly since they are not shy about trying to lure HNWI here with the promise of 'no CGT'. For example, rather than change the definition of 'Capital Gains' as they see fit, why not just introduce it? They could set a CGT free threshold, as in the UK, to remove any effect on 'Mr Average'. They could even set a ceiling of, say, £100k p.a. payable so as not to deter newcomers wanting to unwind a huge gain in a favourable tax climate.

But whatever happens, I do think we need to stop talking about OM occupiers as if they are a race apart. There is prejudice enough already, we do not need new rules which only apply to their tiny section of our community.

GM

Beanjar

Sadly my friend (not client) doesn't know much anything these days because of his dotage so that conversation isn't likely.

An element of grandfathering (no pun intended) would, under my idea, have to apply to existing OM residents to protect those who moved here when their circumstances were very different in years gone by.

I'm not really bothered whether you recognise the stereotype or not. You call it as you see it and I will call it a I see it. We will have to agree to differ.

I disagree with your interpretation of the Tax Office's powers. You are describing how the Tax Office believes it should work. My experience is that they will often back down when properly challenged. Those who don't challenge will get what they get.

Your CGT suggestion actually has some merit in my view, but I don't think it would get much support.

Re your last paragraph, the simple fact is that OM residents are different. They don't have local housing qualifications (although some do, and have chosen to live in OM). That differentiates them however you dress it up. My desire is to see future OM residents make a reasonable contribution to the Guernsey coffers as their part in being able to live here without being otherwise qualified to do so. For those who do already contribute properly - no issue at all. Is it so wrong to expect others to do so as the "cost" of them being able to live here?

Beanjar

I would be very surprised if many OM occupiers would want to take on the Tax Office in court therefore, in practice, whatever they say goes. I think there is obviously a lot of difference between the OM people you know and the ones that I do, GM. At least we can both agree that chucking that poor old boy off the island is not a good idea, even if he can't come up with enough blood money.

Don Tramp

The suicide note was written by those abolishing Court Orders for fishing trips into peoples financial affairs.

Cher Eugene

How we miss Dave Jones. He would have sorted this in 60 seconds flat.

Today we have the Hotel and Care Home sectors making a very plausible song and dance on this subject.

To paraphrase Oliver Hardy "That's another fine mess you have got us into, Mr Guille"

Rottweiller

Cher Eugene

Regrettably some of this may well have been started under Dave Jones's watch. The trouble is, the Deputies, who often have very little real commercial experience, are guided by civil servants who have absolutely none at all.

Perhaps no entry in to the CS until you have done at least five years doing a proper job out in the big wide world.?