Idea is right but timing wrong on corporate tax

Deputy Charles Parkinson went some way towards uniting the States last week with an impassioned speech centring on his favourite subject of corporate taxation.

Deputy Parkinson fought a long battle over the introduction of the zero-10 corporate tax system in the mid-2000s. The tax accountant’s enthusiasm for a system of territorial tax was defeated by the zero-10 system which was adopted across the three Crown Dependencies. Although he went on to become Treasury minister soon afterwards, maybe the time wasn’t right in those early days of the new system, coupled with a global financial crisis, to push for change.

Territorial tax, where multinational businesses, such as those that dominate the financial services industry in Guernsey, pay taxes on the income they generate in the countries where they are based, is not exactly a gamble, Deputy Parkinson argues. It’s used by rival offshore jurisdictions in the Far East and widely across Europe.

While States members may seize on corporate tax as an easier answer to fiscal woes, the Policy & Resources Committee appears hesitant.

It anticipates that change to corporate tax regimes on a global scale will be driven soon by the OECD.

Although there has been talk about 15% global rates, nobody quite knows how that will fit into the Guernsey system and the revenues – which would remain in the island – it might produce. P&R has allowed for £10m. a year in its calculations.

Deputy Parkinson’s argument is beguiling for anti-GST deputies. Make the corporates pay, not the people. He says the committee is too cautious.

Maybe there is an opportunity for P&R to investigate further.

But it is surely understandable that the committee would wish to see a direction of global travel before making significant changes to our regime – however beneficial they might prove.