GST is first step to removing deficit – finance industry body
THE body that represents the finance sector locally has backed Policy & Resources’ tax plans, which includes a 5% goods and services tax.
‘The proposed tax package represents a sound first step in a longer-term solution to address a structural deficit created partly through the problem of an ageing population and rising costs,’ said a Guernsey International Business Association spokesman.
‘The island’s existing finance industry has grown on the basis of tax, regulatory stability and certainty, so Giba supports measures which seek to redress the deficit with a clear and timely plan on the implementation of tax reforms.’
Giba has come out against two amendments which include the possibility of replacing the zero-10 company tax regime with a territorial tax system.
Deputy Charles Parkinson wants the States to back territorial tax in principle and get on with drawing up the details.
Deputy Heidi Soulsby is proposing an investigation into raising more tax revenue from companies, including consideration of territorial tax.
‘Guernsey’s corporate tax system has been a critical factor in attracting new business and clients to Guernsey for decades. Uncertainty about a possible change to the corporate tax system will have a range of negative consequences,’ said Giba.
‘The introduction of a territorial tax on a “go it alone” basis would result in significant risks to existing businesses and make Guernsey uncompetitive with key competitor jurisdictions, such as Jersey.
‘This would also necessitate a review of the corporate tax regime by the EU Code of Conduct. During any reassessment, there would be a period of uncertainty, leading to a reduction in new business, the relocation of existing businesses and inevitably a knock-on decline in the size of our economy and working population.’
P&R asked global consultancy EY to review company tax options last year. It advised against introducing territorial tax without other finance centres making a similar move.
‘Other measures, such as the introduction of a flat-fee corporate levy, would be a more effective and simple way to generate additional revenue from corporates without making any changes to the existing corporate tax regime,’ said Giba.
‘We welcome the opportunity to engage directly with deputies who wish to understand more about the potential impact of the different tax options being proposed in the policy letter and in the various amendments.’