- Without the zero-ten tax regime Jersey would have lost its finance industry, the former Treasury Minister has argued
- Senator Philip Ozouf has responded to critic Richard Murphy – who blamed zero-ten for Jersey’s £125m deficit
- Describes Murphy as an ‘opportunistic attacker’ of the Island
- Should Jersey have brought in zero-ten? Take part in our poll below
JERSEY would have lost its finance industry if it hadn’t introduced the controversial zero-ten tax policy, according to former Treasury Minister Philip Ozouf.
The Senator has defended the regime, under which foreign non-finance firms pay no tax and finance firms pay a reduced rate, following comments from tax expert and campaigner Richard Murphy, who last week said that the policy was to blame for the potential £125 million ‘black hole’ expected by 2019 if a savings plan is not introduced.
ZERO-TEN is a two-tier system set up for companies in Jersey to pay their tax bills.
Finance companies pay 10 per cent of everything they make and non-finance companies pay nothing.
However, the shareholders of those companies pay tax on profits at the usual personal income tax rate of 20 per cent.
Zero-ten was originally set up because the European Union did not like the way the Island was charging tax to businesses based here.
It was seen as the best alternative which would enable Jersey to retain its status as a leading offshore finance industry.
The Senator said that faced with the same situation, he would make the same decisions all over again.
Senator Ozouf said: ‘Without zero-ten, we would have lost our finance industry. It was the only decision for Jersey. Without it we wouldn’t have the money we want to spend on the Health Service. Zero-ten made the Island competitive. I would do it all again.
‘Jersey is now an undisputed, global leader in terms of the transparency of the business we do.
‘Mr Murphy’s whole premise is incorrect. There is no deficit today. It’s about a future deficit, for which the States need to find money.
‘He is an opportunistic attacker of Jersey because he doesn’t like our finance industry. That’s fine, but do not let his views be taken seriously.’
Last week in a blog entitled ‘I Hate To Say It To Jersey, But I Was Right All Along: You’re Going Bust’, Mr Murphy, who runs tax campaigning organisation Tax Research UK, claimed that he had predicted the Island’s huge shortfall eight years ago.
His comments came after senior politicians outlined a potential £125 million shortfall by the end of 2019 if the States carry out planned spending on key areas such as health care, education and capital projects. At the same time, senior politicians proposed a programme designed to generate £130 million in income through efficiency savings and new charges to balance the budget.
Mr Murphy said he had warned States Members that the zero-ten tax regime would have a devastating impact on the economy.
Senator Ozouf added: ‘Richard Murphy never ceases to take an opportunity to attack Jersey and he uses his self-appointed tax-campaigning role in order to talk about things which he simply doesn’t understand.
Senator Ozouf and other senior politicians have continued to champion the Island’s financial position, saying that the potential shortfall is a choice that follows the decision to spend in key areas.
Mr Murphy was ranked the seventh-most influential person in global tax in 2013 by the International Tax Review online journal, but did not appear on the organisation’s top 50 list last year.
NOW that ministers have come clean about the size of Jersey’s black hole, decisions about how we tax and spend are more pressing than ever.
Ministers have repeatedly said that yet more taxation is a last resort and that has to be the right answer.
Whether through direct taxation or by stealth charges, middle Jersey is already shouldering an excessive burden.
Deputy Geoff Southern has called for the rich to pay more to help balance the books. He set his sights on those earning more than £100,000 and the high-net-worth super-rich immigrants known historically as 1(1)k residents.
Meanwhile, tax justice campaigner Richard Murphy says that he has been right all along after warning in 2005 that the zero/ten corporate tax regime would leave Jersey facing a £100m-plus black hole.
We do not know what the economic consequence would have been had zero/ten not been introduced. The question is whether senior ministers buried their heads in the sand and refused to listen to what now appears to have been a prescient voice.
As Jersey moves forward, it must learn the lessons of the past. Shouting down those who disagreed with zero/ten and forecasted that it would lead to an ever-increasing burden on middle and lower tax earners was a mistake because it meant Jersey failed to prepare properly for the current deficit.
Jersey’s tax regime should be reviewed as part of the debate about ensuring future prosperity, but heaping an even greater burden on middle Jersey is not the answer.
Efficiencies and savings must come first.
