The Policy & Resources Committee is commissioning further work on the issue of corporate taxation as part of its work on the Tax Review. The Committee is engaging with States Members, industry and most recently, the wider community on the Tax Review. Already this engagement has seen many questions raised on the role of corporate tax, the evolving offshore tax landscape and whether it can play a larger part in any solution whilst ensuring that Guernsey's finance sector remains competitive and internationally compliant.
The Committee is expecting additional revenues to come from taxes on business as part of the overall tax reforms that will be needed to meet the forecast shortfall of around £85m per year. Its current assumption is that an additional £10m will come from corporate taxes. This continues to be reviewed and updated based on the latest available information and it is also subject to the ongoing discussions taking place internationally on corporate tax rates, and Guernsey alongside the other Crown Dependencies is engaging actively in those discussions. This means the amount of revenues raised could ultimately be more or less, however it is very unlikely it could generate the full £85m per year.
But the Committee continues to explore all and any options for raising additional revenues from businesses, particularly to give the community confidence that it has exhausted all options and investigated every opportunity as part of the Tax Review.
It therefore intends to commission additional independent analysis to further consider corporate tax options and is presently defining the terms for this work. This analysis will take into account the dynamic nature of international tax standards which includes the work being led by the OECD to reform standards to allow for developments in modern day economies, such as cross border trade in digital services.
The Policy & Resources Committee's Treasury lead, Deputy Mark Helyar said -
"I promised last year that we would leave no stone unturned before committing to any final recommendations in relation to tax changes. A package of tax reforms which includes a Goods and Services Tax combined with social security reform to increase allowances and improve pensions and benefits, still remains the best option on the table for raising the significant revenues needed to protect essential services while creating a more progressive tax system that would see those on low incomes pay less overall compared to now.
But we are still listening and examining every other possible option to see how we can minimise the impact of raising additional revenues on the public and the wider economy. This includes other workstreams being carried out by the States such as the population review, looking at maximising the proportion of the population that is economically active, improving efficiency through Public Service Reform and looking at all other options for cutting costs across all States Committees.
Of course the Tax Review should also look at corporate income tax and how we tax companies more widely. However, it is critical that we don't lose business, and ultimately lose jobs, to other jurisdictions. We need to maintain an overall fiscal policy that is competitive while balanced with being fair for the entire population.
Guernsey already raises a similar proportion of its revenues in tax from businesses as other jurisdictions, but we know Islanders and States Members want to see more detail. We also know there are some claims out there that sound attractive at face value but lack substance. Having some detailed independent work to separate out which options are plausible, and which are not, can only help this crucial discussion about how we safeguard the future of essential services."
