The States now expects to receive additional revenue of about £250m. – rather than £120m. as previously estimated – from the first three years of international company tax changes known as Pillar Two.
The new revenue stream may decline in the future, as some companies relocate away from the island, but the Policy & Resources Committee said it provided ‘breathing space’, allowing its proposed tax package, including GST, to be introduced a year later than intended, in 2029.
‘The committee’s assessment of the States’ longer-term financial position has not fundamentally changed,’ said P&R treasury lead Charles Parkinson.
‘Pillar Two receipts are expected to remain elevated for perhaps two to three years before declining as business models adapt, and they should not be treated as a sustainable source of funding for ongoing expenditure.
‘The States’ finances will continue to deteriorate given the demographic pressures we face. Neither does this change the structural issues with our tax base and our over dependence on income-based taxes. Tax reform therefore remains necessary, but what this does give us is a little extra time.’
The revised estimated figures for Pillar Two income – £88m. for the tax year 2025, £84m. for 2026 and £79m. for 2027 – were announced in the States Assembly just before it resumed its landmark tax and spending debate. Deputy Parkinson said they were received by P&R for the first time as recently as last Friday.
In questions which followed his statement, deputies critical of P&R’s proposed tax plan immediately claimed that the Pillar Two windfall made the case for GST weaker and less pressing, but the senior committee remained confident of winning the Assembly’s backing at the end of its ongoing marathon debate, which continues today.
P&R said that a 12-month deferral of its proposed tax plan – which also includes reductions in income tax and social security contributions – would provide more time for ‘public confidence in the Revenue Service to rebuild’ before putting into effect the biggest changes to the personal tax regime for at least 70 years.
‘This is a change of pace rather than a change of direction,’ said Deputy Parkinson.
‘We have been gifted an opportunity to restore some contingency to the implementation of these proposals and to proceed with it in a less pressurised time frame, but we will lose what has been gained if we continue to defer making the clear decision the community needs.’
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