After the States unveiled a ‘go for growth’ strategy two weeks ago, leading industry figures were concerned at the message being undermined by the prospect of the island introducing territorial tax, where only income earned within a jurisdiction’s borders is taxed, and most foreign-earned income excluded.
Countries which use such a system include Panama, Hong Kong and Singapore.
This week the Policy & Resources Committee, and its Tax Review sub-committee, said that it had decided to drop the idea, even though deputies voted last month to keep it on the table.
‘P&R should be congratulated on making the decision,’ said Deputy Mark Helyar, who was also a finance industry lawyer before entering politics.
‘I’m sure this will be warmly welcomed by industry as removing the ongoing uncertainty which was damaging business confidence.’
He said that the idea should never have been pursued for so long, since it had been already been ‘thoroughly dismissed’ on several occasions.
‘Many members of the public who were given false hope in last year’s election that there is a unicorn solution to Guernsey’s revenue problems will probably feel disappointed, but whatever the soundbite AI campaign generated then about “fair” tax in the election period, this outcome was an inevitable racing certainty,’ he said.
‘Yet another waste of time, effort and public money to tell us something which was very well known.’
Deputy Haley Camp laid the amendment to reject territorial tax, but it was defeated by 23 votes to 13.
She said that the committee had now made the right decision.
‘This will send a strong message to Guernsey’s principal industry that government has listened to the concerns and determined that the risks far outweigh the potential rewards – not always a popular position for deputies, but it does recognise that the finance industry is, at this time, critical to our infrastructure and without it, we will have much bigger financial issues to worry about,’ she said.
The Institute of Directors also welcomed the move. It said that a survey of its members had shown that territorial tax was the least favoured of all the corporate tax options being considered by the Tax Review sub-committee, although it was projected to pull in between £3m. and £18m. a year.
‘The evidence from our membership was unambiguous – this option was the least preferred, most growth-inhibiting, and most likely to prompt relocation or downsizing,’ said local IoD chairman Glen Tonks.
‘The IoD strongly advised against the implementation of a territorial regime and recommended that any reforms prioritise international competitiveness and certainty.’
