Time to take control

SO WHO knew what when?

And how long can we fight against the tide with Europe and the UK?

The first question follows the scrapping of zero-10, debated last week.

The second is closely linked, based on the implications a somewhat untrusting mind can find in the Foot review released on Thursday.

Both show that if Guernsey is to continue to play on the international finance stage, the island is pretty much set for a future of putting up, rolling over and saying yes.

Which in fairness is also what others will have to do.

Chief Minister Lyndon Trott told the Guernsey Press that the first he knew of potential problems with the tax strategy was after a meeting with HM Treasury at the end of September.

There is no reason to doubt that.

But a quick trawl of the releases of the European Union code of conduct on business taxation group show the warning signs were there much earlier – long before anyone made public announcements.

Zero-10 was introduced in January 2008 – but has never been officially approved by Europe through the group.

A report from May 2008 said the group's work under the Slovenian presidency identified Guernsey and Jersey's zero-10 regimes as measures where further discussion under standstill was required.

A report from November of that year said the group's work under the French presidency identified Guernsey and Jersey's zero-10 as measures where further discussion under standstill was required.

January 2009 – zero-10 was at standstill.

April 2009 – standstill.

A report in July this year said the group's work for the Czech presidency identified measures where further discussion under standstill was required and again Guernsey and Jersey's zero-10 regimes were on the list.

Now, you have to make some assumptions and cut through the bureaucratic language, but there were clearly problems because the group did not want to endorse the strategy.

And then during the spring and summer of this year, the global political climate was changed dramatically.

The issue of tax havens was firmly in the spotlight through the G20 and OECD and financial meltdown caused jurisdictions to look hard at losing tax flows offshore.

In such an environment, you could perhaps understand the UK's support for zero-10 melting away and the 'not being in the spirit of the code' argument coming to the fore.

That the Foot review, commissioned by Alistair Darling in December 2008, steps pointedly into the corporate tax argument is a clear indication this was on HM Treasury's mind several months ago.

So were we prepared for all this?

Were our links into Europe, the people monitoring what was going on, advising us of this changing political landscape?

Was it their role to? Will a Brussels office put us at the heart of discussion or merely on the edge, where at least we can hear what's going on?

Moving to a zero rate of corporation tax was forced on the island when the Isle of Man began the race to the bottom, thinking that a neat solution to harmonising tax regimes as Europe wanted was to go to the lowest common denominator.

It clearly was not and put several noses out of joint on the way.

The Isle of Man losing a large part of its VAT windfall from the UK is a sign of this.

You cannot fight Europe as a financial centre and survive.

It holds all the cards.

And its influence is only set to grow now it would seem through the Lisbon Treaty.

There are more and more signs that harmonisation of tax regimes is increasingly attractive to large nation states in Europe.

For a report commissioned by the UK Treasury to find a way of including recommendations to introduce VAT or GST and raise corporation tax, you know what is on its mind.

It is that gradual levelling of the playing field, taking away one of the key factors in international business using Guernsey, which should force the island to prepare for a different future?

Now, this may all be decades away – it may be that the billions that flow through the islands up to the UK, and the finding through Foot that if business did leave it would not head for London, will save this sector.

The Conservatives might turn out to be good friends for the Crown Dependencies.

But is it worth the gamble of not even being prepared should 'doomsday' come?

Is it time that talk of diversifying the economy and using the skills already here turns more into action?