Corporate tax key to opening up GST debate
A SYSTEM of territorial tax has been on Guernsey’s radar for more than 15 years. Deputy Charles Parkinson put it forward as a genuine and serious alternative to the controversial zero-10 proposals around 2006. But he narrowly failed to convince deputies, and the public, that it was the better option in a debate which, while heated, never quite caught fire the way the island’s current GST debate is doing.
Since then it has bubbled along in the background. But now it feels at least that this is a debate whose time has come around again, and Deputy Parkinson yesterday updated his thoughts and published a document proposing reform of the island’s corporate tax system.
In short, territorial tax sees a company (wherever it is resident) paying tax in any country or state only on the income it receives from within that jurisdiction.
Adoption of territorial tax is gaining traction worldwide, he says, including among our competitor offshore financial centres. And he pointedly asks – ‘why have more jurisdictions not copied zero-10?’
He points out that employment in the island’s financial services sector has fallen by some 15% since 2009, the number of banks in the island has almost halved – Deputy Parkinson says the claim that zero-10 would encourage growth in the finance sector has failed.
Now whether Deputy Parkinson’s proposals and enthusiasm for territorial tax equate to little more than ‘snake oil’, as claimed, will be for others to prove. But he can legitimately argue that ‘corporate tax reform is a necessary pre-condition for any other tax changes’.
He will receive plenty of support for the contention: ‘The Guernsey public can legitimately demand that all participants in [our] economy should pay their fair share of the costs of our society, before the public are asked to pay any more.
Angry islanders are still waiting for the proof that every other tax-levying opportunity has been examined before they are hit with income tax rises or a goods and services tax, and a thorough assessment of corporate taxation feels like a good place to start.