Guernsey States approve zero-10 tax change
Changes to Guernsey's corporate tax regime needed to make it compliant with the EU code of conduct have been approved.
The States unanimously agreed to follow the governments of Jersey and the Isle of Man in removing an area of the Zero-10 regime known as deemed distribution.
The change will come into effect from 1 January next year.
It is expected to result in an estimated loss of income for the island of £3-4m a year.
The Zero-10 system allows most corporations in Guernsey to pay no tax, while others pay 10% and a minority pay 20%.
- May 2007 - States agree to introduce a zero-10 tax, something already in place in Jersey and the Isle of Man
- Jan 2008 - Zero-10 corporate tax was introduced in Guernsey
- Oct 2009 - UK Treasury raises concerns and Guernsey agrees to a review
- May 2010 - EU suspends review of Guernsey's strategy
- Dec 2010 - Jersey and the Isle of Man's regimes have harmful effects, rules the EU
- Sep 2011 - EU finds Jersey and the Isle of Man's tax regimes will be compliant as long as deemed distribution was removed
- Oct 2011 - EU restarts review into Guernsey's tax regime
- Dec 2011 - Changes to the Isle of Man and Jersey tax systems are approved by the EU
- April 2012 - EU rules Guernsey's tax regime is harmful
Deemed distribution of business profits means island residents who are shareholders of island companies pay personal income tax on any unallocated company profits, while anyone living off-island does not.
During debate Deputy Roger Perrot launched a scathing attack on the European Union.
He has been a long time campaigner for greater autonomy from the UK, particularly in the area of law making.
Treasury Minister Gavin St Pier said he shared the frustration that "external forces have required us to do this, but it is important that we made the change and that was recognised by the unanimous support".
He said: "Clearly there is a tax loss as a result of this measure, but I do think we have to keep this in context it is less than 1% of our revenue budget for this year.
"That's well within the margins of a variance we might have anyway... but we do have to deal with that in our planning for 2013."
Deputy St Pier said in terms of the island's relationship with the UK "we cannot simply haul up the bridge and pretend we can ignore what is going on beyond our shores".