PICTURED: ROB CURRIE. (31162425)
Deputy Susie Pinel was interviewed about the island’s tax policy during yesterday’s meeting in the States after a JEP special report highlighted how the tax burden had shifted dramatically on islanders since the turn of the century.
A number of member states have since questioned the island’s tax policies – and when MP Geoff Southern asked if there would be a corporate tax hike soon, MP Pinel admitted that corporate tax hikes were being discussed by civil servants.
“That can happen. We are in negotiations with the Organization for Economic Co-operation and Development and I cannot comment on these negotiations, ”she said.
“There’s another meeting tomorrow, so hopefully we’ll soon have a conclusion on where corporate taxes go.”
In 2002, 57% of the island’s tax revenue came from corporations and 43% from private individuals. In contrast, taxes on individuals, including the GST introduced in 2008, accounted for 82% of income taxation in 2020 and the other 18% for corporations.
After the zero ten rule was introduced in 2009, where many companies do not pay taxes, corporate revenues fell by £ 135 million in 2010.
The G7 group recently announced that it would introduce a worldwide minimum tax rate of 15% for companies, which would end the zero-ten mark.
Senator Kristina Moore, chair of the corporate services audit committee, said the introduction of a global minimum rate could be an opportunity for reform, but that a balance needs to be struck between the island’s business interests.
She said: “We have to remain internationally competitive while maintaining the best possible quality of life for the islanders.
“There is a premise that companies pay wages. So if they are taxed more, they will have less profit to pay the people. On the other hand, given the changing international climate, there will be an opportunity for strong discussion about how we could rebalance things. ‘
MEP Kirsten Morel said he believed that taxes could be more equitably distributed in Jersey but the impact of a corporate tax hike on the financial sector and small businesses should be considered.
“It is clear that taxation needs to be rebalanced because normal islanders have difficulty paying their bills and being able to afford homes. It does this by broadening the tax base, ”he said.
“Corporate taxes can be part of this realignment, but if it does, the government must be careful of two things. First, a change in corporate tax must not damage tax neutrality [avoidance of double taxation] thus preventing the Jersey financial services sector from doing business. This is particularly important for the fund industry.
“Second, the corporate tax rate of 0% should be kept for small and new businesses as this rate is a huge boost to entrepreneurship on the island,” he said.
He added that certain sectors – such as utilities, financial companies and large retailers – which were already subject to corporate tax of 10% or 20% below zero-ten showed that taxing companies with “reasonable levels of profitability” would not harm companies.
In response to JEP reporting, a Jersey government spokesman said: “On personal taxation, approximately 90% of taxpayers benefit from minor relief and pay less than 20%. Many families pay rates below 15% while enjoying higher tax allowances than in the UK and the other Crown Dependencies.
“The numbers calculated by the JEP do not reflect the full contribution that Jersey companies make to the economy. For example, the analysis excludes the social security contributions paid by employers and does not take into account the GST paid by unregistered and tax-exempt companies. The share of corporate income tax in national income is not disproportionate internationally.
‘Jersey’s corporate tax system has been carefully designed to meet the island’s ongoing tax needs and to align with international standards. This means that Jersey’s corporate tax system is designed to support the needs of a geographically small economy that is open and attractive to global investment. ‘