Corporate tax reform not a quick fix, report finds

Corporate tax reform has been ruled out as a "silver bullet" to help sort an estimated £77m deficit in Guernsey's finances, a report has found.

Policy and Resources' report has said major corporate tax reform cannot deliver sufficient revenues to address Guernsey's immediate financial challenges.

It lays out four "worksteams" as options for raising the money which include ways of using GST, corporate and transport taxes.

Policy and Resources President Lindsay de Sausmarez said: "It is also important that we leave no stone unturned and that we understand where the line of acceptability is in terms of revenue raising, which hurts, and expenditure reduction which hurts."

According to the report there are four workstreams, which are possible ways to raise money.

Workstream 1 was the tax package agreed by the previous States Assembly and could be voted in by the current assembly.

It includes a Goods and Service Tax (GST) of either 5% with food or 6% without.

If GST is included, it would be paired with protections for low‑ and middle‑income households.

The report said this package could raise about £50m a year.

The economy is heavily reliant on financial services, which generates roughly 46% of all States revenue.

Zero‑10 is Guernsey's company tax system where most companies pay 0% tax, certain regulated businesses pay 10%, and a small number pay 20%.

Workstream 2 has recommended the 10% company tax rate is put on all regulated companies, which could raise up to £500,000.

It also suggested an extension of the 10% rate to some other firms including accountants and lawyers, to raise £2.5m.

Workstream 3 looks at how much money could be saved by running public services more efficiently.

The States already has a target to save £17m a year by 2029 through efficiencies without reducing services.

Committees have warned that major service cuts would be unpopular and harmful, especially to people who rely on those services.

Workstream 4 looks at transport taxation, including reducing fuel duty, introducing fairer annual vehicle charges, and bringing electric vehicles into scope.

Deputy de Sausmarez said: "One area that the sub-committee obviously could not consider was the potential for expenditure reduction, which needs to be informed by the committees who deliver public services.

"It's clear that to plug the financial gap through expenditure reduction alone we would need to go well beyond the scope of what efficiencies can deliver.

"That scale of expenditure reduction could only reasonably be achieved via service reductions.

"P&R and the committees alike are keenly aware that any significant reduction in services we provide for the community would be unacceptable to most islanders, but it's important that we explore where that line between reasonable and unacceptable might be so we can find the best balance between expenditure restraint and increasing taxes to inform our recommendations to the States."

Next week the sub-committee will begin a series of events with industry and the public to discuss the findings of its report.

Policy and Resources will also hold public drop‑in sessions, giving members of the P&R committee the opportunity to discuss tax reform before the committee finalises its policy letter.

On 2 June the 2025 States accounts will be published.

While these accounts are expected to show an improved financial outturn for the year, they will not reflect the underlying financial position on which future public finance decisions will be based.

The P&R Committee will then publish its final proposals in a policy letter on 8 June, ahead of a States debate scheduled for July.

In the period between publication of the proposals and the debate, the committee will also host a Facebook livestream to answer questions from the community.

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