Policy & Resources has published a consultation paper this week on five potential alternatives which could replace the zero-10 regime.
Former treasury lead Mark Helyar believed the senior committee’s review had created uncertainty since it was announced last summer and would cause damage for as long as it was allowed to continue.
‘I think it’s a dangerous waste of time and money,’ said Deputy Helyar.
‘I am told that the uncertainty it is creating in the finance sector is already causing us to lose business and for investment decisions to be delayed.’
He predicted that the review, led by long-time zero-10 critic Charles Parkinson, would find that the answers to its questions about territorial tax and other alternative systems had not changed since the options were studied ahead of the last major company tax reforms two decades ago.
Deputy Parkinson has said the work was ‘progressing well’ and that the panel of specialists drawn together were on course to make recommendations to P&R in March ahead of a landmark States debate on tax in June.
But Deputy Helyar expected the review to uncover little which could be expected to help deal with a black hole in public finances which P&R recently estimated was growing towards £100m. a year.
‘Hopefully it will yet again come to nothing. If not then I’m afraid we can only expect Guernsey’s fortunes to decline quite rapidly,’ he said.
When P&R set up the review, Deputy Parkinson said public involvement would be central, and he even speculated about the possibility of holding some of the specialist panel’s meetings in public. But P&R declined a request last week to clarify whether the panel would meet in public. And when asked about public involvement generally, it referred only to the current consultation paper, which was aimed primarily at the business sector, and a live video event scheduled for tomorrow evening.
Deputy Sasha Kazantseva-Miller said there had been ‘minimal or no engagement at committee level’ from those leading the review.
P&R’s consultation paper estimated that alternatives to zero-10 could generate additional tax revenue of between £0.5m. and £18m. annually, a figure far short of the income boost of £40m. a year which the treasury had already projected from international tax changes known as Pillar II which are under way.
David Dorrity has urged the States not to rely on Pillar II projections, which he feared may be overly optimistic, but was even more concerned about two of the published alternative options to zero-10.
‘I firmly believe that adopting territorial taxation or introducing a unilateral zero‑15 corporate tax regime, without alignment with the other Crown Dependencies, would risk driving our finance industry to Jersey or the Isle of Man,’ said Deputy Dorrity.
‘However, once a level playing field has been created through the introduction of GST‑plus, I believe we can begin discussions on a coordinated zero‑15 approach with the other Crown Dependencies, who I understand may then be willing to revisit the zero‑10 corporate tax regime.’
Andrew Niles understood why P&R wanted to review company tax but hoped it would complete the work ‘quickly, carefully and discreetly’ and warned that prolonged debate or a major political disagreement about the best way forward would be ‘unhelpful and potentially very harmful’.
P&R has pledged that its final recommendations will maintain a competitive and internationally acceptable company tax system which also supports economic growth.
It has requested consultation responses by 27 February.