Guernsey Press

Deputies urged to reject £5m. levy on companies

Business groups have urged deputies to reject a new £5m. levy on companies which has been put forward to repay borrowing for education capital projects.

Deputy Kazantseva-Miller’s proposal is ‘damaging to business and the island’s financial credibility’ say industry groups. (Picture by Luke Le Prevost, 32740074)

Six groups representing hundreds of firms in finance and other sectors criticised Deputy Sasha Kazantseva-Miller’s amendment as damaging to business and the island’s financial credibility. The States Assembly, which resumes its adjourned debate on the 2024 Budget today, has already spent nearly five hours debating the amendment. Its supporters had promoted it as the best way to fund at least £100m. of borrowing to develop a post-16 campus at Les Ozouets as part of Education’s £130m. reorganisation of secondary and further education.

The executive of the Chamber of Commerce claimed it would be imprudent to borrow just weeks after the States rejected several plans to deal with a hole in public finances projected to reach £100m. annually.

‘We are concerned about the potential risks associated with the amendment as it currently stands,’ said Chamber.

‘The proposal to raise additional revenue for the Transforming Education Programme, while commendable in its intent, appears to lack comprehensive consideration of long-term financial implications. Such an approach, in our view, could jeopardise Guernsey’s financial credibility and governance reputation.’

Chamber said it supported redeveloping the Guernsey Institute for further education studies, but not funding the project in a way which it labelled ‘a deviation from responsibility’.

The business groups were responding to a request for their views from the Economic Development Committee. Their letters were sent to States members yesterday, on the eve of debate resuming on the funding amendment.

Deputy Kazantseva-Miller, a member of Economic Development, has said that her amendment for a new levy on companies was consistent with the findings of a study of company tax options carried out by consultants EY earlier in the current States term.

But the Institute of Directors claimed that companies’ support for a levy at that time was now being taken out of context.

‘The IoD position is one of concern regarding the proposed amendment,’ it said.

‘It is not a good precedent and risks encouraging further proposals of this nature which will not necessarily consider the sustainability of public finances and the tax burden in a holistic approach.’

The Guernsey International Business Association said it opposed ‘piecemeal amendments’ and implored deputies to arrange ‘a thorough impact analysis’ of measures, such as the proposed corporate levy, which would effect the finance industry.

The Guernsey Association of Trustees feared that a new levy could drive existing business away from the island and discourage new business and called for ‘further research and investigation’ before deputies even considered voting for it.

Deputy Kazantseva-Miller agreed with the business groups’ calls for a thorough assessment of new taxes and charges before introducing them but believed this could be done after the States backing her amendment.

‘This type of more detailed analysis would be undertaken as part of the workstream to review the Guernsey Registry fees and structure early in the next political term,’ she said.

‘This work will include competitive analysis with other jurisdictions, including the fees in Jersey, where they also have to pay the international service fee as an exemption to GST.’

Deputy Kazantseva-Miller also supported the groups’ concerns about the States’ failure to agree a long-term tax and spending plan to deal with an annual deficit. But she said she was encouraged by the insight provided by the consultation exercise.

When the Budget meeting was adjourned the week before last, the amendment was being debated alongside another amendment from Education president Deputy Andrea Dudley-Owen, which proposes re-authorising Policy & Resources to borrow another £200m. to help fund her committee’s capital projects but does not identify any new income streams to repay the debt.