Extra tax millions a big factor in Ozouets proposal – Trott

The previous Policy & Resources Committee, ousted last month, estimated that the changes – known as Pillar II – would increase tax revenue by £10m. a year. But the new P&R believes they will be worth at least £30m. a year.

The revised estimate was a key factor behind P&R’s new proposal to fund the development of the Guernsey Institute at Les Ozouets at a cost of £88m.

‘Literally just before Christmas, we were told our forecast corporate tax revenues were going to be significantly better than we expected,’ said P&R president Lyndon Trott. ‘That has given us flexibility that our predecessors did not have. That changed the dial, no question.’

Throughout last year’s debates on tax and capital spending, which led to the former P&R’s removal in December, Deputy Trott and his vice-president, Heidi Soulsby, who will second his amendment on education funding, argued that the development at Les Ozouets was unaffordable and undeliverable alongside a £120m. modernisation of the Princess Elizabeth Hospital.

However, six weeks after his return as P&R president, Deputy Trott said that the improved company tax forecasts would comfortably cover repayments on additional borrowing necessary to build at Les Ozouets.

‘This is all possible, in our view, because we’ve had some welcome developments in terms of the forecasting for our public finances,’ he said.

‘This comes against a backdrop of better-than-expected economic growth in Guernsey over the past two years, putting the island in a stronger position both to fund borrowing and replenish its reserves.

‘The numbers work. The numbers that have been produced around Pillar II are conservative. The truth is that we expect those receipts to be even more than we are forecasting. The numbers are entirely deliverable.’

The previous P&R repeatedly warned of a structural deficit and projected a hole in States finances of about £100m. a year by 2040.

Deputy Trott said the increased Pillar II company tax receipts, which are expected from 2026 at the earliest, would now ‘go a long way towards reducing the structural deficit’, albeit further changes were still necessary.

‘It doesn’t change the fact that long term we still need solutions to make public finances sustainable. But it does allow us to be a bit bolder investing in our community now and we should do that.

‘Investing in our island reflects the confidence we should rightly have in our growing economy.’

Pillar II is a global initiative to set a minimum effective tax rate of 15% for the world’s largest companies. It is expected to capture most of Guernsey’s regulated banks, which are currently at 10%, and a significant proportion of the island’s international insurance activity, which is currently taxed at 0%.

Deputy Soulsby said the P&R amendment to fund a scaled-down education development at Les Ozouets was also good for housing.

‘We have reached a compromise, working with Education to save the development. The Guernsey Institute is long overdue. We have let people down by the fact it has not been built by now,’ she said.

‘And we can free up a site for housing at the Coutanchez, which is another top priority.’