Guernsey's zero-10 tax regime 'could be acceptable'

A Guernsey tax expert said the island's zero-10 tax regime could be considered acceptable, if changes are made.

Graham Parrott, a tax partner from Ernst and Young, said by following the lead of the other crown dependencies, Guernsey could benefit.

Jersey's corporate tax regime was approved by an EU code of conduct panel after some minor changes were made.

Mr Parrott did warn, however, that such changes could lead to Guernsey losing millions of pounds in tax revenue.

Zero-10, introduced in January 2008, meant the standard rate of income tax for companies was set at 0%, with some specific banking activities taxed at 10%.

Personal income tax

A review into Guernsey's corporate tax regime was restarted in October 2011 by the European Union Code of Conduct Group, after it was placed on hold in May 2010.

Concerns were raised by the UK Treasury in 2009 over the island's zero-10 tax not being compliant with the EU code, and in May 2010 the States gave assurances it would revise the strategy.

The similar regimes of Jersey and the Isle of Man have undergone reviews, which in September 2011 found they would be compliant with the EU code if deemed distribution (in Jersey) and attribution regime for individuals (in the Isle of Man) were removed.

Both mean residents who are shareholders of island companies pay personal income tax on any unallocated company profits.