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Fears mount over changes to zero-10 tax regime

Fears are growing in the UKs Crown Dependencies over changes to the current zero-10 tax regime.

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Guernsey, Jersey and the Isle of Man have all recently bowed to pressure from Europe and said they will review their respective tax regimes which currently see businesses pay rates of tax of between zero and 10%.

The reviews follow a warning in October 2009 from HM Revenue & Customs that the EU Code of Conduct Group on Business Taxation no longer deemed the zero-10 corporate tax regime to be compliant with the ‘spirit’ of the code.

Since then there have been growing fears from industry representatives on all three islands that a change to the current regime, seen by many as an important way to lure international business, would be very damaging to the health of the three island’s economies.

This view reportedly has been supported by a survey on the Isle of Man which suggests an end to the current zero-10% regime would "devastate the largest sectors of the Manx economy."

On Guernsey meanwhile, Ernst & Young tax partner Graham Parrott warned an audience of business executives and politicians at a recent Chamber of Commerce briefing that changing the regime would drive business away from the Island, and that people “off-island” already think Guernsey has moved away from it. He added that a flat 10% rate would be “unacceptable to the people who do business" with Guernsey. Isle of Man treasury minister, Anne Craine, moved to allay fears from her own jurisdiction following the survey from the Scorpio Partnership and said it was still too early in the review process to speculate whether the Island will amend its current business taxation system.

“At this stage it is not clear whether the current zero-10 regime needs to change,” said the minster. “Since the launch of the consultation the European Union Code of Conduct Group for Business Taxation has determined that the Isle of Man’s business taxation system should now be subject to a formal assessment.

“Any decision on whether the business taxation system needs to change will not be made until the outcome of this formal assessment is known. If a change is required the Island will not pre-empt any move ahead of that of our competitors.”

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