Guernsey States is abolishing corporation tax in 2008 to keep the island competitive as an off-shore banking centre.

But it is relying on 4% economic growth to fill the financial gap.

Economist Rosemary Radcliffe believes Guernsey will have to work hard to maintain its competitive position.

But she said politicians should have the final say.

"They are the people who must decide who are the most appropriate to bear an increased tax burden," she said.

"I would very much hope that our report can help them in this process and help Guernsey continue with the success it has enjoyed over the last few years."