Until relatively recently, for example, Jersey promoted two main tax-avoidance products – the Exempt Company regime and the International Business Company regime.
The Exempt Company regime enabled companies worldwide to add their name to the Jersey companies register, for a fee of a couple of hundred pounds, and provided they were not trading in Jersey they were not asked for a penny more.
The International Business Company, however, was the big one, because it applied to banks. Under this scheme, banks were asked to pay tax on income earned in the Island, but any income earned outside it was taxed at a reduced rate.
How reduced depended on the individual agreement forged with the Comptroller of Income Tax, but in general terms the more the banks were making outside the Island, the lower their tax rate. Some were paying as little as half a per cent on many millions of pound of revenue.
A couple of years ago the European Union decided that they were not happy with this arrangement, nor with similar arrangements that existed in other offshore centres. They imposed a clampdown, called the Code of Conduct on Business Taxation. The UK Treasury, wanting to make a good impression in front of its EU neighbours, ordered Jersey to comply with the code or else face sanctions.
What to do? The Island’s finest financial brains from the private-sector finance houses set to work to find a solution. They set up workshops to discuss how the finance industry could carry on drawing in new business without the attraction of the Exempt and International Business Company regimes.
And they came up with the notion of zero/ten: ten per cent to be paid by the finance houses (which is ten per cent less than they were paying before) and zero per cent for all other companies.
This, they believed, would be permitted by the EU because it meant that in theory, at least, everyone would be paying the same tax.
In practice, of course, resident Jersey companies continue to pay their 20% tax, because the shareholders and directors of the companies living here get taxed on their company profits.
The other drawback is that the abolition of the previous schemes – which means that companies not registered in Jersey no longer pay their 20% tax here – has left a massive hole in our tax revenue.
Last week, against all previous statements made by the Chief Minister and, indeed, his predecessor, the European Commission, via the UK, called time on the zero/ten proposals.
Interestingly, the Channel Islands are not the only ones to be pinned against the wall. The Isle of Man, which is also a Crown dependency but has managed to maintain a VAT ‘sharing arrangement’ with the UK, will be sharing rather less of that VAT than in previous years. £140 million less, in fact.
Jersey’s Treasury Minister has always been quick to refer to the undoubted advantages that the Manx authorities gain through this VAT arrangement. I suspect that this week he will have been feeling rather smug that Jersey has never been party to anything like it.
Why I feel run-down over cars
I WAS cheered to see that the Island’s competition authorities have shown their intention to get stuck in to the motor trade.
According to the Jersey Competition Regulatory Authority statement, there will be a review not only of the prices of new cars, but also of the servicing of existing vehicles.
It is the latter which mainly concerns me, because although my vehicle has only ever had one careful owner, average wear and tear is beginning to show. Nevertheless, I have dutifully taken it in for a service every year and I do believe there is life in the old boy yet.
On the last two occasions, however, the service from a reputable garage has been below the standard I have come to expect.
Last year a fault was identified and I agreed to have the work done and asked the garage to let me know when the part had arrived. As no call was forthcoming, I rang them again a few months ago with a similar request, but no one came back to me.
When I took the car in for its annual brush-up a few weeks ago I was told that the item I required was no longer available unless I purchased a larger chunk of engine. That chunk would set me back nearly £500 – plus, of course, the hourly rate for the job.
More galling still, when I went back to retrieve my car from the first garage, I was told that it was their ‘worst nightmare’. Apparently, they said, parts had arrived but they were the wrong ones. But thiswas discovered only after the mechanic had dismantled the vehicle.
Coincidentally – and armed with the knowledge that the current recession has hit the motor trade more than most – I should not have been too surprised to find a leaflet about the dealer’s scrappage scheme on the passenger seat.
Could it be, I wonder, that garages are seeking to convince us that our older vehicles are past their sell-by date in order to persuade us to trade them in for a much newer model?
Far be it from me to suggest such a thing. It will be interesting to see what the JCRA’s investigation discovers.