Guernsey has made a bold move in the field of tax as part of its continued efforts to stay at the forefront of global financial jurisdictions. As from 1 January 2008, the standard rate of income tax on company profits is 0%, with only a limited number of specific banking activities being taxed at 10%. This is what is referred to as the "zero-10" regime.
The island's Treasury and Resources Minister, Lyndon Trott, insists zero-10 is the best and least-risky course of action, particularly in the light of recent global economic turbulence.
'International credit markets have had a torrid time in recent months,' he told the Guernsey Press. 'Many believe that growth in the world economy will slow significantly as a result of the lack of investment capital or, more accurately, the lack of appetite for lending that capital. I doubt the Bailiwick of Guernsey will be immune from these global influences, but the policies we have in place will certainly help to offset many of the negatives the credit crunch has brought.'
Deputy Trott said failure to change would have been far more risky and far more unpredictable. 'We opted for the safer option and for that I make no apology. The key to our future success is maintaining sustainable levels of employment, controlling public expenditure and remaining a good place to do business.'
Public Services Minister, Bill Bell, said Guernsey was already benefiting from zero-10 because a record 2,000 companies had been formed in the island in 2007 up to November.
'All the evidence, and there is an abundance of it, is that zero-10 is working,' he said. 'Listen to the professionals in the various industries which make up the finance sector and they say they are being flooded out with business.'
As the island attempts to balance the needs of the sector with the danger of over-population, there is an estimated shortfall of 1,000 people in the financial world, and the onus falls on recruitment firms to help companies find the key staff of the right calibre - with AP Group's global reach giving it a distinct advantage.
With similar issues to address, Jersey is poised to adopt zero-10 in 2009.