Deputy calls for end to corporate tax "scam"

Monday 04 October 2021

Deputy Charles Parkinson has launched a scathing attack on Zero-10 and has questioned whether Policy & Resources understands corporate tax well enough to design a new system of taxation.

He lambasted the suggestion of introducing a GST until the corporate tax situation "has been sorted out", something he does not believe the States' senior politicians have the competence to do.

"The people of Guernsey have suffered enough since 2008,” he said.

“Guernsey’s fiscal problems began in 2008 with the introduction of zero-10 – we will start to solve the problem when we fix that.”

Deputy Parkinson took issue with some of the claims made by the Treasury Lead for P&R, Deputy Mark Helyar, during his introductory speech. It was here that Deputy Helyar said that any reform of corporate tax could adversely affect the finance sector.

Pictured: “We’re not being given the option of voting on corporate tax,” said Deputy Parkinson.

“These remarks tell me two things; firstly, he does not understand corporate tax, and secondly he has done no serious work on the amount corporate tax could potentially raise,” said Deputy Parkinson.

“When people say this would make us uncompetitive, they just don’t understand – they don’t know what they’re talking about,” he continued.

Deputy Parkinson argued for a type of corporate tax called territorial income tax, which would force taxation only on Guernsey-based income. This, he said, would not affect the banks since most of their income is not made on-island.

This would be a direct alternative to Guernsey’s current policy of Zero-10, which sees Guernsey based businesses pay 0% and international corporations pay 10%.

"Local sources of advice are hopelessly conflicted. The people who pay them for their advice are the very people who might be subject to a corporate taxation scheme"

He suggested that P&R simply isn’t able to create a new corporate tax system, and lamented that he was unable to vote on one.

“The task of designing a new corporate tax system is quite technical and having read this policy letter I question whether P&R have the wherewithal to do it," said Deputy Parkinson, an accountant by trade with expertise in this area.

“I’m also certain that the local sources of advice are hopelessly conflicted. The people who pay them for their advice are the very people who might be subject to a corporate taxation scheme.

“The advice we would need to develop and define a corporate tax system would have to come from outside the island and from people who really understand this stuff,” he said.

He also opposed the argument that a new corporate tax would lead to local businesses moving off-island.

“It would apply to everyone who works in the Guernsey domestic economy. The argument that they would leave is ridiculous, because if you run a Guernsey car mechanic business in the island you won’t move to the Isle of Man because it’s very hard to service a car from Douglas.”

Exceptional speech from Deputy Parkinson. There.....I said it!

— tothevale (@tothevale) October 1, 2021

Pictured: Deputy Parkinson was commended for his speech by others in the assembly.

Furthermore, Deputy Parkinson said some of the loopholes that exist under the current system allow some businesses to avoid paying their fair share.

“[Under the current system] there’s a huge incentive for local companies to keep their profits in the company and not pay a dividend, because as soon as they do they have to pay 20% tax on it.

“As long as it’s sat in the company minding its own business they don’t have to pay any tax at all, and ‘surprise, surprise’ some of these companies go out and buy corporate jets or ski chalets in Switzerland.

“This simply avoids them having to pay money to the shareholders and they get the use of some corporate toy for some nominal amount and frankly we just allow this scam against the States of Guernsey to go on and it's time it stopped,” he said.

GST still remains on the table after last weeks debate was deferred by a fortnight.