Zero-ten: Tax burden now on ordinary Islanders laid bare

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A JEP analysis of government accounts shows that in 2002 – during the pre-zero-ten and GST era – 57% of the Island’s income tax came from companies, with the remainder paid by Islanders.

By contrast, 2020 taxes on individuals, including GST, accounted for 82% of revenue taxation, with companies providing the other 18%.

Critics have blamed the trend on the Island’s controversial zero-ten corporation tax system, which was introduced in 2009 after the EU Code of Conduct Group deemed the previous regime, under which foreign-owned companies could apply not to be taxed, to be ‘discriminatory’.

Under zero-ten, most companies in the Island pay a nil rate of tax but certain sectors, such as the finance industry, pay 10% and others, such as utility companies, pay 20%.

In recent years Jersey has faced further external pressures that affect how the finance sector operates, such as calls to make the Island’s company register more transparent and, this year, a G7 initiative to introduce a global minimum corporation tax rate. The wider G20 group of nations has indicated its support for the move and is expected to vote in favour of reforms that could reshape international tax systems in early July.

Deputy Geoff Southern, who publicly aired concerns about zero-ten at the time of its introduction, said that he believed changing the Island’s taxation system now needed to be investigated, with a view to making it fairer for Islanders.

‘We were told ten years ago that the tax burden would switch from corporate to individual taxpayers and that is exactly what has happened,’ he said.

‘I think people would be really surprised if they knew how much of the tax burden falls on individual taxpayers now. We should definitely have a more equitable system where the tax burden is shared more equally, but a problem is that companies have become used paying the zero rate.

‘I don’t know what the answer is but work needs to be done to look at changing the system.’

In yesterday’s JEP Weekend Essay, tax justice campaigner Richard Murphy, a longterm critic of Jersey’s low-tax regime and its finance sector, said that increased taxation of individuals in the Island had been ‘inevitable’ after the introduction of zero-ten.

Oliver Hughes, of Vibert’s corporate law team, said that zero-ten had played a ‘significant role’ in the shift from corporate to individual taxation, but suggested that the G7’s plans for a global minimum corporate tax rate could help address the issue.

‘A global tax rate should increase Jersey’s corporate tax intake, which may, in turn, reduce the pressure on local residents to meet Jersey’s long-term budget deficits,’ he said.

Under the G7’s plans, companies’ overseas profits would be taxed at least at the global minimum rate, which is proposed to be 15%, with their home country able to claim a ‘top-up’ to that level if they are not.

For example, if a US company had a subsidiary in Jersey the US Treasury could claim 15% additional tax on that company if the Island retained its zero rate.

If Jersey taxed the subsidiary 10%, then the US would only be able to claim 5%. Jersey could also charge a 15% rate and collect all of it.

The JEP approached the government communication unit to request a comment from the Treasury Minister or Chief Minster on Thursday 24 June.

At the time of writing no response had been received.

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