Attac Jersey is a Member of the International Tax Justice Network. We are Members of the Association for the Taxation of financial Transactions for the Benefit of Citizens, (ATTAC) and the Tax Justice Network, (TJN). The aims of both organisations are to research, educate and campaign to further public awareness. We are seeking to alleviate poverty through the creation of just taxation systems to fund social goods.

Monday, November 8, 2010

Zero Ten, the real thruth


Ted Vibert, President of the Jersey Democratic Alliance.  



The phrase “zero- ten” has been bandied about so often that the history of zero-ten has been over-looked or forgotten. It is important that the people of Jersey fully understand just what damage this tax regime has done to our finances.
All sorts of reasons have been advanced by Ozouf about the cause of the black hole. One day it’s “the global recession”, then it’s the fact that “we’ve been spending too much” and then it’s an” overpaid and overstaffed public service” but not once has he blamed the zero-ten taxation regime that he was partly to blame for introducing.

Jersey introduced it because the Isle of Man did so in 2002. This action by the IOM was seen as a real threat to our finance business, because they dropped tax on banks and finance businesses from 20% to 10% Zero-ten also makes it a tax free environment for businesses owned outside of Jersey and trading here.

When it was debated in the States, we were told that this would be vital for retaining our finance industry, otherwise we would lose the business. We were also told that it would create a “black hole” in our finances of up to £80 million by 2011and this would be covered by the introduction of GST at 3% and “20 means 20”.
At that time, no one informed the States of the content of the EU Code of Conduct for Business Taxation. The Finance Committee( as they were called then) were aware of this Code but never informed the States about it. Why?

The simple answer is that the EU code of conduct specifically outlawed any form of zero-ten tax regimes but Walker, Le Sueur and Ozouf took a gamble and hoped they could get away with it.

When the Scrutiny Panel I sat on in 2006 investigated the zero-ten proposal, I questioned Frank Walker and Terry Le Sueur closely about this and they kept saying that their zero-ten proposal had been approved by the UK government and therefore it would be approved by the EU.

We wanted to know if this approval was in writing After a lot of huffing and puffing, ducking and diving, they said that it was a verbal approval. We were never told who gave that approval despite asking several times who it was –and when?

The wording of the Code is quite simple and unambiguous and is designed to eliminate “harmful tax measures” amongst member States of the EU, These measures are defined as those that “provide for a significantly lower effective level of taxation, including zero taxation, than those which generally apply in the member State in question, are to be regarded as potentially harmful and therefore covered by this code.

“Such a level of taxation may operate by virtue of the nominal tax rate, the tax base or any other relevant factor.
“When assessing whether such measures are harmful, account should be taken of, inter alia
1 Whether advantages are accorded only to non-residents or in respect of transactions carried out with non-residents.
2 Whether advantages are ring-fenced from the domestic market so they do not affect the national tax base
3 Whether advantages are granted even without any real economic activity and substantial economic presence within the Member States offering such tax advantages

The Code of Conduct includes a commitment by EU member States not to introduce new tax measures that are “harmful” ( a “standstill” commitment) and to remove harmful tax measure (a “rollback” commitment). Whilst the Code of Conduct is not a EU directive but rather an agreement between Member States, it is expected that member States will seek to work within its terms. The Code of Conduct commits member states to “promoting its principles in other countries outside of the EU and in particular provides that Member States with dependent and associated territories or which have special responsibilities or taxation prerogatives in respect of other countries commit themselves within the framework of their constitutional arrangements to ensuring that these principles are applied to those territories.”

It should have been clear to the Walker-Ozouf-Le Sueur group that proposals to introduce the Zero-Ten tax system that they introduced to help the finance industry, disobeys the Code on all counts.
• Zero- tax and 10% tax are harmful
• The zero corporate tax structure disadvantages Jersey-owned companies and therefore is against the Code.
• All elements of zero-ten disobeys the commitment not to introduce new tax measures that are harmful

And why should it have been clear.?

Because it’s so damn obvious.

Now we are in the position of having introduced zero-ten and the EU are unhappy about it. The UK have told us its our problem to sort and no one knows yet what decision the EU will make. Ozouf has admitted that they have no plan in hand in the event of the EU telling us finally that it is unacceptable. Yet we have based our whole financial future on it

And they call themselves the” safe pair of hands”.

It is hard to believe how anyone in the UK government at the time could have approved a system of taxation so diametrically opposed to the EU Code of Conduct especially since the chair of the Group which developed the Code was chaired by Ms. Dawn Primarolo, a prominent member of the Labour cabinet.

The best thing that can happen is for the Chief Minister to scrap zero-ten and revert back to our 20% tax rate. This will put our finances back in credit and remove the need for these drastic actions which are going to hurt the ordinary people of Jersey so much.

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