Jersey tax change enrages activists

A newly approved tax system in Jersey has enraged tax activists who believe
the new regime, called 0/10, will bleed the island’s finances dry.

The Jersey government approved the 0/10 plan last week after intense pressure
from the European Union. The tax haven had previously exempted foreign investors
from corporation tax and levied a 20% rate on Jersey residents.

This system of preferential treatment was unacceptable to Europe and, to
appease Brussels, Jersey went ahead with 0/10, which exempts from corporation
tax all businesses except those in financial services, which will pay a tax rate
of 10%.

Jersey officials believe the new system will satisfy Europe, while retaining
the island’s attractiveness as a low-tax jurisdiction for foreign investors. Tax
activists, however, have claimed it will blow a £120m hole in Jersey’s £500m
annual budget.

Richard Murphy, from Tax Research Limited, said the island would have to fund
the shortfall by imposing other taxes on locals.

‘Jersey is planning a goods and services tax to fund the shortfall from 0/10
and will probably have to look at income tax too. This will hurt the people of
Jersey who will have a higher cost of living in a place that is very expensive
to live,’ Murphy said.

Murphy added that the goods and services tax would only raise £45m, which
would force the Jersey Treasury to use its £500m of reserves to make up the £75m
annual shortfall.