States reject territorial corporate tax again

Thursday 19 October 2023

Deputy Charles Parkinson gained no additional votes as he tried to convince his colleagues to bolt taxing the profits of locally based companies onto wider funding considerations as a failsafe option if borrowing and GST is defeated.

His amendment to Policy & Resources tax plan, seconded by Deputy Liam McKenna, would’ve given deputies the option to introduce a new corporate income tax regime on a territorial basis with a general rate of 10% to 15% to raise a minimum of £30m a year.

It also called for hundreds of millions of capital expenditure to be carried out this term, including the hospital modernisation and Les Ozouets education campus, through, if necessary, up to £250m worth of borrowing.

But it was defeated 11-29 with some politicians describing it as “dangerous”, “snake oil” and damaging to business and investment. A similar proposal previously brought by the pair lost 11-28 in the January tax debate.

Deputy Parkinson told the States that a territorial tax system is about to come in for some companies regardless of any decisions taken by politicians this week.

The OECD’s Pillar Two global corporate tax rules, which hundreds of countries have signed up to, will see companies with an annual turnover of at least £750m be taxed 15% or more on profits. That will be introduced in Guernsey from 2025 and is in essence a territorial tax regime, he said. 

“Corporate income tax reform is already on the slipway ready to be launched and is going to be launched whatever this assembly decides today,” he said. 

“We are going to have one for larger companies”, he said, urging members to be a leader before these changes are inevitably brought in before the end of the decade.

Jersey and the Isle of Man are already in agreement on implemented these global changes in a joined-up way, he added. He said there are also murmurs that Jersey is beginning to soften its stance on Zero-10. 

Deputy Parkinson said voting for the amendment would grant flexibility in the event all other tax and spend options, including P&Rs three scenarios, were rejected.

Pictured: Leading business bodies, Chamber and GIBA, were highly critical of the amendment.

Deputy Lyndon Trott, who led the move to introduce Zero-10 years ago, and is also the Chair of Guernsey Finance, said if he had a “tenner” for every time corporate tax changes have been discussed he would be “richer than Deputy Ferbrache”. 

Being in “lockstep” with the Crown Dependencies, and therefore the island’s competitors, on a corporate tax regime is “absolutely essential”, he added, and questioned whether many companies locally would be captured by the incoming OECD global rules. 

This assessment was brandished as ironic by Deputy Sasha Kazantseva-Miller, given Deputy Trott’s upcoming attempt to change the island’s rate of income tax to something different from Jersey and the Isle of Man.

Deputy Trott continued: “There's a very good reason why successive policy and resources committees have come to the same conclusion. There's a very good reason why investigative committees come to the same conclusion. And there is a very good reason why our international financial services community gives us the same answer over and over again. There will be a time but it's not now."

P&R’s Deputy Mark Helyar said breaking rank would be akin to “throwing a hand grenade into our main industry”. The idea had been brought back to the States as the Assembly had “no courage” to bring in GST.

“If in time the OECD manages to persuade everybody to move a little bit further, so be it. That's a fantastic thing because we have nothing to lose by moving together at the same time as everybody else. We have everything to lose by jumping. We're out of the plane without a parachute,” Deputy Helyar added.

Deputy Parkinson warned P&R that he would continue bringing territorial tax back to the States so long as the Committee continued re-proposing GST without wholesale corporate tax reform. 

How they voted:

Pour: Bury, Dyke, Fairclough, Gollop, Le Tissier, Leadbeater, Matthews, McKenna, Parkinson, Soulsby, Taylor.

Contre: Aldwell, Blin, Brouard, Burford, Cameron, De Lisle, De Sausmarez, Dudley-Owen, Falla, Ferbrache, Gabriel, Haskins, Helyar, Inder, Kazantseva-Miller, Le Tocq, Mahoney, Meerveld, Moakes, Murray, Oliver, Prow, Queripel, Roberts, Roffey, Snowdon, St Pier, Trott, Vermeulen. 

Debate continues…