‘Be like Hong Kong with tax to tackle massive bully EU’

High-profile lawyer James Quarmby, noted for his defence of international finance centres, said the island needed to be ‘clever’ when it came to any changes to its tax policies as he blasted the EU as a ‘massive bully’.

His comments, made during a visit to the island, come as the EU has focused its attention on the tax policies of third country jurisdictions, publishing a blacklist of non-cooperative locations in December. To remain off the list, Guernsey has had to promise to make adjustments to its corporate tax regime before the end of this year.

‘What we’re seeing with the blacklist is an attempt for outside countries to influence how you organise your taxes,’ said Mr Quarmby, who was a guest speaker at the International Trust and Private Client Forum Guernsey held at the Old Government House Hotel. ‘Technically you have sovereignty. But if you want to play with the other children, you have to play by their rules because there are bigger children than you. You’re a tiny child and you’ve got the EU, which is a massive bully.’

He added: ‘So what’s going to happen is over time, I think, the concept of sanctions and blacklists will be honed down – and such an obvious target for them is going to be zero tax regimes, isn’t it? Because that’s what stands you out from anyone else.

‘Show me an EU member state that has a zero corporate tax regime. Now actually all of them do, but they do it the other way round and this is what I’m arguing Guernsey should do.’

A corporate tax rate of 12.5% would bring the island into the range of Cyprus, Malta and Ireland. ‘But what Malta’s done, which is clever, is bring a 35p rate, but with refunds on extraction.

‘So what you need to do is be clever about how you do it. You either do the refund route so you pay it and then you get it back,’ said Mr Quarmby.

‘Or you go for what I call the Hong Kong route, which is you only charge tax on locally-sourced income and that’s where I think you should go.

‘And then what you’ve got is China behind you, because you can say: “Well if you’re going to put us on a blacklist you’re going to have put Hong Kong on the blacklist – and oops, who’s sponsoring Hong Kong? The world’s second largest economy.”

‘So I think that’s where you should go.’

Policy & Resources president Gavin St Pier said they were ‘committed to keeping well-appraised of ever-changing developments in the world of international corporate tax.

‘Guernsey has had many reviews in terms of international tax standards and on all occasions we have passed with flying colours,’ he said.

‘Having been reaffirmed as a cooperative jurisdiction by the EU last year, our focus is currently on further engaging directly with the EU’s Code Group this year in order to further strengthen our approach on “economic substance”, identifying steps that will ensure we continue to meet international standards as they emerge.

‘We are also under direction of a 2015 States resolution, arising from the Personal Tax, Pensions and Benefits Review, which instructs us to have “due regard for the need to provide a stable platform, maintain business confidence, support and encourage financial services and to retain an internationally acceptable and competitive tax environment for the islands’ businesses, to continue to closely monitor the appropriateness of the corporate tax regime, and to report back to the States should it consider any changes are necessary”.’