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Zero-ten: Securing the future
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That this is a notable achievement for those responsible for framing tax policy is scarcely in question, though there are still one or two rough edges to be considered. For example, although the relevant European Union authorities have given the fundamental principle of zero-ten what appears to be a green light, the business taxation Code of Conduct Group will meet again tomorrow to take a last look at Jersey’s position.
More importantly, a concession was made to secure a favourable outcome in the EU’s corridors of power. An anti-avoidance provision known as ‘deemed distribution’, judged to blur the distinction between business and personal taxation, has been axed. This, we are told, will involve a temporary loss of revenue amounting to less than £10 million – though it remains to be seen if that is an accurate estimate.
If indeed the cost of maintaining zero-ten turns out to be as low as has been suggested, the loss of deemed distribution can be regarded as a very acceptable price to pay for the retention of a key pillar of the economy.
In spite of this, public rejoicing is likely to be limited. Although zero-ten allows us to offer the tax neutrality which is essential for offshore financial business and, therefore, safeguards a vital flow of cash into the public purse, ordinary Islanders are inclined to see the downside of the measure – which in any event is poorly understood. It is, after all, the reason why GST and swingeing reductions in income tax concessions became facts of Island life.
However, anyone with any appreciation of the bigger picture should acknowledge a debt of gratitude to Chief Minister Terry Le Sueur, Treasury Minister Philip Ozouf and their team – which includes international adviser Colin Powell – for defending the Island’s best interests with skill and patience.
It might be true that GST, higher income tax and social security payments, and a high basic cost of living continue to bear down on Islanders, but securing zero-ten by the sacrifice of the pawn of deemed distribution will make it far easier for us to climb successfully out of the recession than would otherwise have been the case.
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