Isle of Man Tax Strategy Could Destroy Jersey

NEW TAX STRATEGY COULD DESTROY JERSEY

GUERNSEY could go bust within the decade as a result of the Isle of Man's aggressive tax policy according to a UK expert.

Richard Murphy, an adviser to the tax justice network, has accused the Island of trying to destroy The Channel Islands. He said that Treasury's latest proposals to cap corporate tax could be the final nail in the coffin for Jersey and Guernsey.

The proposal document, released last week, follows on from the budget announcement of a zero/ten taxation policy for corporations in the Island.

It suggests that the taxing of banks (which will still pay 10 per cent tax) could be capped at £6 million, meaning any profits above £60 million would go untaxed.

The policy is designed to attract banks to headquarter their organisation here. It would target organisations like RBSI, headquartered in Jersey, that, last week, announced profits of £229 million for 2005.

Mr Murphy believes this could spell disaster for the Channel Islands who are already struggling with a black hole in their finances and a sizeable budget deficit.

He said: 'It's a pretty direct act of economic aggression on the part of the Isle of Man. It's seeking to undermine the economies of Jersey and Guernsey. As a result Jersey is going to have to follow suit (zero tax) and it already has an enormous black hole (£100m).'

He added that the Isle of Man were likely to reduce the corporate tax cap from £6m until Jersey and Guernsey were squeezed out.

'Jersey will be eating very heavily into its reserves and I simply don't believe it can achieve the level of growth it needs. Guernsey is heading bust within the decade and Jersey a while longer,' he added.

He also claimed that Treasury's proposals would fall foul of the EU code of conduct, when implemented next month.

He said: 'The new corporate taxation laws will fall foul of the EU code of conduct on business taxation. I am well aware of governments around Europe that will raise objections to this when it is enacted.

'For some time the Isle of Man has been trying to claim it is not a tax haven, but this makes a complete mockery of that claim. It absolutely and emphatically puts a banner over the Island which says tax haven.'

Malcolm Couch, assessor of income tax for the Government, said: 'Our standard rate of corporate tax will be zero per cent from this April.

'There should be nothing surprising in the fact that we will examine ways that we can move those companies that pay some tax at 10 per cent closer to the standard rate, and the idea of a corporate tax cap is one of those ways.'

'Treasury and Tynwald's fiscal discipline, through which we always budget for a surplus, gives us far more freedom to be innovative than some other countries. That is something that we should be immensely proud of and in no way defensive.'

Mr Couch made clear that the Isle of Man develops fiscal policies to maintain the strength of our economy and allow it to grow further, not with other countries in mind; although he added that international commitments to the EU and other organisations were very much part of Treasury's thinking.

29 March 2006

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