Friday 25 May 2012
Following written confirmation from the Chair of the EU Code of Conduct on Business Taxation ('the Code Group') that Guernsey's zero/10 corporate tax regime was deemed to be harmful at its meeting of 17 April 2012, the Treasury & Resources Department today publishes a supplementary Billet for the June Meeting of the States of Deliberation recommending the repeal of the deemed distribution provisions of the zero/10 tax regime from 1 January 2013 and is published with accompanying ordinance.
It is anticipated that the Code Group's current assessment will be formally ratified by the Council of European Finance Ministers at its meeting on 22 June 2012. The view of the Code Group was that whilst the manner of operation of Guernsey's deemed distribution regime was quite different to the deemed distribution and attribution regime of Jersey and the Isle of Man (which had previously been viewed as harmful) its de facto effect was the same but with only a timing difference. This assessment was based on a description of Guernsey's corporate tax regime that was prepared by the European Commission in consultation with States of Guernsey officials and presented to the Code Group in February 2012.
Deputy Gavin St Pier, Minister of Treasury and Resources, commenting on the report, stated:
"The Code Group has already confirmed through precedent that a zero / 10 regime without deemed distribution aspects is compliant through its previous assessment of Jersey and the Isle of Man. I am confident that repealing our deemed distribution regime swiftly and decisively is the right action to take and will result in our corporate tax regime being assessed as compliant with the EU Code of Conduct on Business Tax. The move will ensure that our corporate tax regime remains internationally acceptable and competitive and provide the necessary tax neutrality which is vital to safeguard the economic success of our finance industry."
It is anticipated that the EU Code of Conduct Group would formally consider a States' decision in June to remove the deemed distribution provisions later this year during the Cypriot Presidency of the EU.