Tax on profits ruled out as too risky

Guernsey's government has ruled out introducing a territorial tax, despite months of work looking at whether companies should pay more.

Such a levy would have made companies pay on profits earned on the island.

Deputy Charles Parkinson, who leads the Tax Review Sub-Committee, said the idea would not form part of the recommendations going to the Policy and Resources Committee in April. He said there was a clear public feeling that businesses should pay their fair share, but any change must protect the island's reputation and appeal.

Independent experts advised against it, and the sub-committee concluded that now was not the right moment to take the risk.

"There is an expectation from the public that businesses pay their fair share of tax, but this must be in a way that does not affect our attractiveness as a good place to do business," said Parkinson.

He added that the island would still need to update its corporate tax system in future as international rules and technology continued to shift.

The wider tax debate is heading for a crunch point this summer, as Policy and Resources plans to take some final proposals to the States in July.

One option still on the table is a goods and services tax (GST).

If politicians decide to introduce it, they have already agreed it would apply to food but must come with protection for low and middle income households, including a cut in income tax to 15% and increased allowances.

Deputy Gavin St Pier said the government was keeping all options open as it tried to deal with financial pressures.

He said: "Our focus continues to be on ensuring the States can make a fully informed set of decisions to ensure fair tax reform."

The sub-committee's findings will be published in mid April, followed by public events to explain the work.

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