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Policy & Resources say an attempt to just increase corporate taxes for the foreseeable future will leave the Bailiwick in uncertain and unchartered territory.
P&R have pointed to EY’s independent review of corporate tax options which shows that a territorial tax system would generate around £20m per year but feel it is too big a risk for the island’s financial services sector.
While P&R are open to exploring corporate tax reforms alongside the other Crown Dependencies as part of its package, its members fear that the proposals put forward by Deputy Charles Parkinson could compromise competitiveness and drive business out the island.
The Committee also note that its forecasts show that tens of millions of pounds in extra revenue will be required every year by 2040 and leaving other revenue raising options until the next decade would be irresponsible.
Deputy Charles is preparing to explain his alternative of a Corporate Income Tax (CIT), set between 10% and 15%, to around 200 members of the public at a presentation tonight.
Deputy Parkinson will be joined on the panel by amendment seconder Deputy Liam McKenna, former States economist Andrew Sloan, Korrine Le Page of the Guernsey Retail Group and Dave Beausire - former director of Le Mont Saint Garage.
Pictured: The territorial tax alternative will be fleshed out at St. Pierre Park Hotel tonight.
Policy & Resources also queried why proposed reforms to the social security and income tax system have not been addressed through this challenge.
It maintains that introducing new social security allowances and a new 15% income tax band will reduce the burden on lower earners.
If the CIT amendment is successful, these propositions will be deleted.
P&R President Peter Ferbrache said while the challenge will win support amongst those doggedly against a goods and services tax, “it leaves [Guernsey] with no way of meeting the growing shortfall in public finances and funding essential services and I’m appealing to States Members not to support it”.
Deputy Mark Helyar, P&R’s treasury lead, said the Committee have been mindful of Deputy Parkinson’s preference and therefore asked EY to investigate it.
“But we need to be very careful in how we continue to explore this going forward so that we don’t create so much uncertainty that we damage the very sector that creates most of the jobs in the Island and drives our economy,” he said.
“If we proceed headlong down this road, it could put question marks over our credibility as an international finance centre, and we could do irreparable damage and ultimately the shortfall in public finances will be even greater.”
The tax debate will start on Wednesday 25 January.
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