Deputy who disputed figures predicts the end of zero-10

Charles Parkinson was repeatedly rebuffed by other senior politicians when he advised them that additional income from new global tax rules, known as Pillar II, would be tens of millions of pounds higher than the States was then estimating.

Within days of the new Policy & Resources Committee being elected, it increased the estimate from £10m. to at least £30m. a year, with well-placed sources saying privately that it could eventually be many millions higher than that.

‘Of course, it’s not just Pillar II. That will start the process, but we will need to design a whole new company system to replace zero-10,’ said Deputy Parkinson.

‘Pillar II is territorial in nature and the new overall system which we will need to design will inevitably be territorial as well.’

Pillar II is likely to require multinational companies with revenue of more than 750m. euros and their subsidiaries to pay a minimum tax rate of 15% wherever in the world they are based, with effect from 2026 on profits from 2025.

Including parent groups and subsidiaries, it is estimated that Guernsey has about 600 such companies.

‘The only difference between Pillar II and wholly territorial system is the income threshold. If you took out that proviso, the rules would be exactly the same, and there is an argument for saying that a lot of the smaller companies are less mobile anyway and less likely to move away.

‘Of course, this is not a trivial issue, and designing it will clearly take some time. My advice to the States Treasury is to look at the Hong Kong system and copy it.’

Deputy Parkinson acknowledged that some sectors of the economy may need different tax arrangements than those applied in general.

But tax adviser Graham Parrott did not see why Pillar II and zero-10 should not exist alongside each other.

He dismissed the idea that Pillar II should lead to a wholesale territorial tax system when, as far as he knew, Jersey and the Isle of Man wished to retain zero-10.

‘I see no desire to apply 15% across the economy more broadly,’ said Mr Parrot.

‘It’s ironic that Deputy Parkinson brought the motion of no confidence in Deputy Peter Ferbrache and the old P&R for bringing GST to the States three times and failing, when Deputy Parkinson has taken territorial tax to the States many times and also failed.’

Mr Parrott said he saw no justification for assuming that the revised estimate would create other opportunities to collect more tax from companies.

‘If anything, if there is £30-40m. from Pillar II, it might mean other avenues are more limited,’ he said.

Deputy Parkinson claimed he had faced more or less the same criticism for his views on company tax for more than 15 years.

‘We have been, and we still are, allowing most companies to pay 0% tax out of fear that they would otherwise leave, and this is just nonsense,’ he said.

‘It doesn’t stand up to any sort of scrutiny. Many people in the industry know themselves that this is plain nonsense.’