Latest Information
Guernsey International Business Association Responds to the Tax Review
17 October 2023
The Guernsey International Business Association (GIBA) has provided input into the States of Guernsey’s (SoG) development of the Tax Review in the interests of resolving the real and pending structural deficit dilemma.
GIBA implores the States of Guernsey’s Deputies to act at the earliest opportunity to avoid further delays that will have adverse commercial, economic and social consequences for the Island. The absence of investment in infrastructure, health and education alone will have severe direct and indirect consequences on the lives and prospects of the people of Guernsey with long term ramifications.
Standard & Poor (S&P) Global has warned of further ‘negative rating action… if the government fails to implement tax reforms that stabilise its funding needs.’ A further downgrade will make Guernsey less attractive to business and increase costs, exacerbating the deficit.
Whilst it is being suggested that capital investment could be withheld or pension funding deferred this will add to costs in the future necessitating more radical revenue raising later i.e. even bigger tax increases.
The island’s finance industry generates almost 40% of its GDP and provides employment for around 7,000 islanders. The finance sector has grown on the basis of tax, regulatory stability and certainty so GIBA supports measures which seek to redress the deficit with a clear and timely plan on the implementation of tax reforms.
Business is expected to make a significant contribution to revenues under the Policy & Resources Committee’s Funding & Investment Plans. However, mechanisms for achieving this do not and should not include changes to the existing corporate tax regime. Guernsey is aligned with Jersey and the Isle of Man with a collective approach to corporate tax OECD’s Pillar Two Framework. Remaining in lockstep with the other Crown Dependencies is critical. International accountancy firm, Ernst & Young (EY) considered the introduction of a new corporate income tax on a territorial basis when other competitor jurisdictions maintain their existing regimes and concluded that to do so will lead to a reduction in new business and could also cause existing businesses to relocate.
E&Y also warned that any move to a territorial system can be expected to trigger a reassessment by international standard setters in relation to corporate taxation, including the EU’s Code of Conduct Group and the OECD Global Forum. This would import further uncertainty and damage to Guernsey’s economy by making the island less attractive to do business in, negatively impacting growth in the island’s key revenue-generating industry.
In short, the unilateral adoption by Guernsey of a territorial tax regime brings significant risk without substantive reward.
Other measures that are envisaged in P&R’s proposals, such as ISE exemption fees, the introduction of a flat fee corporate levy, and OECD Pillar II compliance are a more effective and simple way to generate additional revenue from corporates without making any changes to the existing corporate tax regime. That said, more clarity and detail is required in these areas and proper consultation with industry, based on a thorough impact analysis, should take place prior to implementation of any of these potential measures.
GIBA accepts the need for revenues to be raised by widening the basis of our tax system with a mitigated consumption tax and increased business contributions to SoG’s revenues. However, it is also essential for government to achieve savings from spending cuts. GIBA notes the Chamber of Commerce has highlighted Public Sector Pension Reform as one of the single biggest cost savings that could be achieved. Compensating measures would be required to insulate nurses, teachers and other essential workers but defined benefit/final salary schemes have been closed and confined to history across the private sector across the world because they are unsustainable.
We recognise that these are challenging issues for Deputies to consider. However, the policy letter does contain a combination of elements that offer a sound basis on which to move forward. The proposals also attempt to rebalance the island’s sources of tax revenue in line with other jurisdictions, such as Jersey.
We welcome the opportunity to engage directly with Deputies who wish to understand more about the potential impact of the different tax options being proposed in the policy letter and in the various amendments over the coming week.
Statement from Guernsey International Business Association on the Government Workplan
16th October 2023
Paul Sykes, Chair of the Guernsey International Business Association (GIBA) says:
‘Ahead of the States debate of the Government Workplan, GIBA recognises that skills, participation in work and fostering entrepreneurial growth and innovation are all important factors in ensuring Guernsey is an attractive place to do business and in the island’s economic and social prosperity.
Affordable housing remains a critical issue for the finance sector. The costs and availability of housing play a significant role in recruiting and retaining staff; the ability to attract and retain staff with the right skills is a crucial factor in the island’s competitiveness and the health of Guernsey’s economy.
To ensure Guernsey’s future prosperity we must prioritise investment and growth. The continuation of government funding for Guernsey Finance must be part of the island’s economic development strategy.
The finance sector remains the island’s biggest single driver of GDP, and Guernsey has a lot to offer as a jurisdiction, but it is competing in an extremely crowded marketplace against very well-resourced competitors.
Decisiveness and a clear strategic direction are essential to give businesses the foundations and confidence needed to invest in the island’s future. We look forward to a positive conclusion from this week’s debate.’
GIBA Statement on Electricity Strategy Debate
GIBA understands the urgency for the States of Guernsey to act decisively in the matter of the island’s electricity strategy, which is critical to the long-term economic wellbeing of Guernsey, including the financial services industry, the backbone of our economy. GIBA understands that Deputies should also be mindful of affordability, security and evolving trends in sustainable and responsible energy measures and will seek to factor these in proportionately to their decision-making in order to retain Guernsey’s credibility on a wider global stage.
Guernsey International Business Association (GIBA) welcomes the States of Guernsey’s action plan on housing
The Guernsey International Business Association (GIBA) welcomes the recently announced housing action plan issued by the Committee for Environment & Infrastructure following the review of Guernsey’s housing market by independent experts, Arc4.
The association notes the plan aims to provide all people living in Guernsey access to a range of good quality housing that is affordable, secure, energy-efficient and adequate for their needs.
GIBA recently conducted its own housing survey, focused on the financial services sector. It revealed that there are currently between 500 to 600 job vacancies Guernsey’s finance sector and an associated requirement for housing and accommodation. The survey identified that finance sector demand focused on one to two bedrooms dwellings; with a third less demand for three-plus bedroom houses. Over 95% of the required units of accommodation would be rented.
The survey further revealed a number of recurring themes. For example, firms referred to the costs and availability of housing as significant issues when it came to recruiting and retaining staff with several firms indicating that this was one of the main reasons staff had left the island and relocated elsewhere.
The ability to attract and retain staff with the right skills, is a critical factor in the island’s competitiveness and the health of Guernsey’s economy. The finance sector employs around 20% of Guernsey’s working population but generates nearly 40% of the island’s GDP.
It is GIBA’s belief that urgent change is needed and GIBA is pleased to see the plan sets out a clear timeline and prioritised actions; the plan is a positive step forward.
GIBA welcomes the news that economic growth and competitiveness is named as a strategic portfolio in the latest Government Workplan.
Paul Sykes, Chair of the Guernsey International Business Association (GIBA) says: ‘GIBA welcomes the news that economic growth and competitiveness is named as a strategic portfolio in the latest Government Workplan. Digital connectivity, skills, transport, entrepreneurial growth and innovation are all critical factors in ensuring Guernsey is an attractive place to do business.
‘The finance sector remains the island’s biggest single driver of GDP, and Guernsey has a lot to offer as a jurisdiction but it is competing in an extremely crowded marketplace against very well-resourced competitors.
‘We also note the acknowledgement of external pressures such as anti-money laundering, combatting the financing of terrorism and economic substance requirements in the Government Workplan.
‘To ensure our jurisdiction’s future prosperity we must prioritise investment and growth. GIBA believes that the continuation of funding for Guernsey Finance is a key part of that strategy.’
