Latest estimates are for the company tax changes to bring in £305m. in the four-year period ending in 2028, up from earlier estimates of between £40m. and £120m.
Policy & Resources treasury lead Deputy Charles Parkinson, who had consistently said that the earlier estimates were far too low, has already suggested that the figures could grow higher still.
The Assembly agreed in-principle yesterday that any receipts above the latest estimates should be transferred to the States’ Core Investment Reserve, previously known as the Contingency Reserve or ‘rainy day fund’.
An amendment calling for that approach, led by Forward Guernsey leader Gavin St Pier, was approved with only two votes against.
‘The real value of the reserve, adjusted for inflation, has significantly reduced, with its value as a percentage of GDP falling from 10.7% in 2006 to 5.1% in 2025,’ said Deputy St Pier.
The reserve was used to fund deficits resulting from the introduction in 2008 of the zero-10 company tax regime and to support the economy and public services during the Covid pandemic.
‘The current value is approximately £200m., while the current policy target is to hold 100% of general revenue expenditure – approximately £720m.,’ said Deputy St Pier.
‘Independent analysis by the Fiscal Policy Panel suggested that to provide a contingency sufficient to absorb the impact of exceptional events, the reserve would need to be increased to between 30% to 60% of GDP, equating to a target range of £1bn. to £2bn., a level that would take decades of sustained surpluses to reach.
‘In any event, the current balance of the reserve is well short of its recommended minimum balance.’
Pillar Two receipts are expected to decline in the years ahead, as companies adjust their behaviour in response to the new rules.
The successful amendment also proposed that 50% of any Pillar Two income received from the tax year 2029 onwards should be put into the Core Investment Reserve.
The two Alderney Representatives were the only States members who voted against the amendment, after P&R said it was happy to support it.