Who dares to touch the tax cap?
With impeccable timing, just before The Sunday Times’ Rich List was published, Jersey announced plans to increase tax rates for its super-rich residents.
It’s a brave move for an island which has regularly been associated with both having and flaunting wealth.
Jersey now wants its ‘super-rich’ to pay at least £250,000 a year in income tax – a 47% increase from £170,000 – for those living locally under its High Value Residency Scheme. The change should make the island an extra £1.2m. in tax every year.
That looks like small beer given the potential to upset a valuable, but potentially volatile, market. And it’s that risk of upset that seems to worry the Guernsey authorities, who maintain a tax cap of just £50,000 for the first four years of residence, rising to £150,000, still lower than Jersey and Isle of Man.
Guernsey’s research during the early stages of the Tax Review uncovered that the wealthiest 5% of island residents contributed 26% of the island’s tax revenues, more than the 60% of the population which is made up from low and middle-income households.
Tax is an obvious driver for relocation, but far from the only one. Often new arrivals are effusive about why they chose the island aside from tax – but is any move on tax a risk too far for relatively small return? Jersey may soon see.