Guernsey’s black hole begins to bite

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I have for a long time said Guernsey and will go broke over the next few years because of the black holes in their budgets as a result of their introducing 0% tax rate on non-resident corporates’ profits, on which until 2008 they were heavily dependent. They had to do this because of competition from the Isle of Man, which could of course afford a 0% tax on corporate profits because of the £200 million (or more) subsidy it receives from the UK Exchequer each year.

Now reports:

Guernsey’s Treasury and Resources Department is taking draft legislation for a General Sales Tax to the States for approval this month. The government has however insisted that it does not seek to introduce a GST, but instead is merely considering its options.

So the burden of tax is, once again, being transferred from the tax avoiding corporate community onto ordinary people.

What is clear is that this is unsustainable. Of course a modest GST could be imposed in Guernsey, but let’s be clear, the capacity to do so is limited, not least because the cost of living in the Channel Islands is already very high and at some point people in Jersey and Guernsey (and Cayman and elsewhere) will reject the option of being a tax haven when the pressure upon them for being so becomes to great.

This GST in Guernsey is another step in that direction. Tax haven’s days are numbered.