Corporate tax reform proposed over income tax rise

Charles Parkinson said the middle class faced being levied the most by more taxes

A Guernsey politician will attempt to get more money from island corporations in place of government plans to raise income tax.

The island's senior political committee, Policy and Resources, has proposed a 2p in the pound hike in income tax for two years, which it said would ensure the future of its major projects portfolio.

Former Treasury Minister Deputy Charles Parkinson said he would lodge an amendment to scrap the plans, which he said would drive more young people away, and instead put forward proposals for corporate tax reform.

Deputy Lyndon Trott, President of the Policy and Resources Committee, said he would not comment on any potential amendments until they were formally submitted.

'Weaken our position'

The States' financial problems began when it introduced the zero-10 system in 2008 that has allowed some companies to pay no corporation tax, while others pay 10%, according to Parkinson.

He added that finances would not be fixed until the States tackled the root cause.

He said: "Levying more taxes on the middle class won’t solve the problem.

"It will only weaken our competitive position in terms of personal income tax and social security contributions, thus driving away more young Guernsey people who increasingly see no future for themselves in Guernsey."

Parkinson pushed for corporation tax reform but failed to get the backing of States members in 2023.

He said he believed it could get backing this time as none of the alternative solutions, including increasing the rate of personal income tax, had "found favour with a majority in the current assembly".

"In this respect, the proposal to introduce a general corporate income tax is no different than the proposal to increase the rate of personal income tax or the proposal to introduce a GST," he said.

'Long-term financial challenges'

The States said at the time of Parkinson's previous push for zero-10 reform that the levy was introduced to make Guernsey "competitive with other jurisdictions" and many changes had been made since to "offset its consequences".

Speaking about the latest development, Lyndon Trott said: "Our key message is that our proposals will support growth, enable critical investment in our ageing infrastructure and stabilise the financial position of the States over the next two years.

"This will give the new assembly the time it needs to agree on a solution to the long-term financial challenges we face."