KPMG Jersey – living on another planet

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Guernsey has said of the decision by the EU Code of Conduct Group last week that:

it has received confirmation that, at its most recent meeting (19th November, 2010), the EU Code of Conduct on Business Taxation (‚ÄòCode Group’) agreed with unanimity that the zero/10 corporate tax regimes have harmful effects. It is understood that, whilst the formal assessment process has not technically been concluded, the expectation is that the Crown Dependencies will be required to introduce revised corporate tax regimes.

Although Guernsey’s zero/10 regime has not been subject to review by the Code of Conduct Group the implications of last Friday’s conclusion by the Code Group will need to be thoroughly reviewed and assessed.

I’ve already compared this with Jersey’s official response but now KPMG have moved response in Jersey into the world of fantasy. According to the Jersey Evening Post:

EUROPE’S response to the zero-ten tax package is ‚Äòvery good news’ for the future of the finance industry, according to the tax partner at major accountancy firm KPMG Channel Islands

John Riva said he was very pleased with the outcome of the meeting last week at which the EU Code of Conduct group on tax matters discussed zero-ten.
Mr Riva said his assessment was that there was a ‚Äòtacit’ acceptance of the zero-ten regime.

‚ÄòIt would appear we will be able to maintain a zero per cent and a ten per cent rate and that will give us certainty,’ he said.

However, he said that the code group had decided that a process known as ‚Äòdeemed distribution’ of profits to shareholders was a business tax rather than a personal tax.

This is ludicrous. Guernsey, responding to the same information, say a revised corporate tax regime is needed, the existing one is harmful, and that reform is inevitable. KPMG say the scheme has been accepted. Someone has to be wrong – and I’ll say it is categorically Mr Riva. Having your tax system fail three out of five tests is not a ‚Äòtacit acceptance’. It’s rejection. And nor is it an offer of certainty. It’s a demand for reform and pretty major reform at that.

It’s pretty amazing that anyone can put out such a statement. And it is certainly seriously misleading to do so. But then illusion has always been the basis for the Crown Dependencies’ financial services industry, so perhaps believing rejection is good news is a normal part of the deal in Jersey.