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A solution – but not a victory
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This was fully recognised in the States yesterday when Members agreed to abolish deemed distribution – a move which will, we are told, cost the Island £10 million – to make the whole zero-ten edifice compliant from the EU’s perspective.
Treasury Minister Philip Ozouf has said that the path is now clear for Ecofin, the EU’s economic and financial council, to approve the remainder of the zero-ten regime. If this forecast is accurate, the system designed to safeguard core tax revenues by doing away with alleged harmful practices, albeit at considerable cost, will at last function without a damaging cloud of uncertainty hanging over it.
There is every reason to believe that the demise of deemed distribution will represent a considerable benefit to the Island and Islanders. However, its abolition cannot be regarded as anything like an absolute triumph. There is, to begin with, the matter of that £10 million which will be lost – a figure which some continue to insist underestimates the probable scale of the damage. Presumably the shortfall, no matter how big, will have to be made up from some other source of revenue.
As several Members pointed out when the issue was debated, the executive could well be tempted to see GST, that most alluring of fundraising instruments, as a means of plugging the gap. If, indeed, the present Council of Ministers or their successors begin looking in that direction, they would do well to turn their attention elsewhere. The least well-off and middle Jersey have already borne the burden of increased taxation disproportionately.
But there is a direction in which ministers should most certainly be looking. As promised, they must press ahead to develop a workable mechanism which will extract a fair contribution from those companies which trade in the Island but, because they are not based here, pay no tax.
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