I have long advocated reform of our corporate tax system, to ensure that all companies doing business on Guernsey contribute to our Income Tax collections. I propose that this be achieved by a 10% corporate Income Tax, levied on a Territorial Basis (ie only on profits generated in Guernsey). Many of our most successful competitors (eg Gibraltar, Hong Kong and Singapore) use this system, and have enjoyed far higher growth rates than Guernsey’s or the growth of the other Crown Dependencies over the last decade.
Reform of our corporate tax system is now urgent, because Guernsey will be running huge fiscal deficits in 2020 and subsequent years. We expect to use up nearly £200m of our reserves in alleviating the impact of Covid-19. And some of that money has been distributed to companies that currently pay no Income Tax to Guernsey. We should all be in this together!
Regulated financial services businesses on the island already pay tax at 10%, and very few of their client companies would be affected by a Territorial tax system (because they don’t earn money in Guernsey). Large retailers, regulated utilities and cannabis growers currently pay tax at 20%. It is companies outside these sectors that pay 0%.
A fiscal review is scheduled to be completed by Policy & Resources Committee by June 2021, and the topic of GST will feature prominently in their proposals. While I understand that we have a major fiscal problem, I will not support any more increases in taxes on individuals until the corporate sector is paying its fair share.
In my view, the 20% Income Tax rate for individuals, and the absence of capital taxes (eg Capital Gains Tax and Inheritance Tax) are bedrocks of Guernsey’s prosperity, and should not be tampered with.