Several hundred JFL members attended the event at the Hotel de France, which featured speakers from four major accountancy firms and covered the tax changes arising from the zero-ten proposals and GST.
John Riva from KPMG outlined the proposals to bring in a zero tax rate for all Jersey companies from 2009, apart from financial services firms, which will pay ten per cent, and utilities, which will continue at the current 20%.
Mr Riva explained that tax for financial services would apply to permanently established banks, trust firms and investment businesses (but not fund managers or insurance companies) and was ‘much wider’ than the corporate tax schemes proposed in Guernsey and the Isle of Man, where trust and fund firms would be zero-rated.
Mr Riva, who is a member of the fiscal working group set up to review the new tax proposals, explained the reasoning behind the move, which he said seemed to be going against States policy to grow and extend the economy.
‘Will business move from Jersey? Would a trust company get rid of its staff and leases and move to Guernsey, or the Isle of Man?
‘If we hear that businesses are moving, we could move the tax to zero,’ he said. ‘This is very much about waiting and seeing what happens.’
Paul Eastwood, senior manager at Deloitte, explained in detail how the ‘deemed distribution’ provisions would apply to all directors and shareholders of Jersey resident companies.
He said that from 1 January this year the Comptroller would require much more information on income tax returns, including new requirements for individuals to list all sources of profits or gains, details of acquisitions and disposals of sources.
Mr Eastwood also suggested that States tax revenues would be adversely impacted in 2010 because the zero corporate tax scheme was due to start in 2010, payable on the 2009 tax year, but the deemed distribution arrangements were not due to start until 2011.
Jane Stubbs, tax partner at PricewaterhouseCoopers, outlined the current proposals relating to GST for the financial services industry. She said that some aspects had not yet been finalised and were still subject to change, despite the start date of 1 May this year.
‘Amazing’
‘Developing these provisions has been very hard work,’ said Mrs Stubbs, adding that the Jersey economy had required some ‘amazing and unusual’ solutions.
She explained that the new concept of an International Services Entity would effectively place finance firms ‘in a bubble’ in relation to GST, so that they need not register, charge, or suffer GST on supplies which cost more than £1,000. To qualify for ISE status a firm would need either to be on a list maintained by the Comptroller of Income Tax or meet specified conditions.
Although firms would be charged a fixed rate depending on the service offered (for instance banks would pay ?30,000 per licence) there was an opportunity to ‘tweak’ the classification, although the political expectation was for a total tax take of between ?5 million and ?10 million.
Finally John Shenton, tax director at Ernst & Young, said the legislation included lots of subtle changes which might go unnoticed by the majority.
He mentioned the Draft Tax (Land Transactions) Law, due for States debate on 11 March, which was effectively a stamp duty but administered by the Income Tax Office.
Another proposal was to tax rental income on property leased by UK companies such as Boots (the Blampied proposal). This would not be creditable against UK tax and therefore the cost to the UK business would probably be passed on to the consumer, said Mr Shenton.
He also suggested that once the International Business Company Scheme was phased out in 2011 some businesses would go with it, as they were used to paying much less under the IBC arrangements and would not want to pay the standard ten per cent tax applied to other finance firms.
‘Good job’
Nevertheless, in the circumstances Jersey had done ‘a really good job’ in finding solutions to the requirements of the UK Treasury and the European Union. ‘We have had open and very frank discussions and you do not get that level of co-operation in other places,’ he added.
