Jersey has a tax gap of, give or take, £95 million as a result of it moving to Zero / 10 taxation of companies. There now seems widespread belief that I am right that this will result in about £120 million of tax revenue being lost by the Island (22% of its current state income) and that the GST it is introducing will raise less than £30 million because of the absurd exemptions given to the financial services industry. The 20% means 20% for better off members of Jersey society is now in disarray, not least because Jersey politicians know that this will be abused by Jersey citizens using Jersey's new sham trust laws.
This has been known now since at least 2005. I know, because I made this clear when I was engaged as a consultant by the States of Jersey in the summer of that year. But I was assured I need not worry about it. The problem would be solved. Which makes me all the more amused to note that according to the Jersey Evening Post Senator Terry Le Sueur, the finance minister of the Island, was late last week asking consultants how he might create laws that might require non-resident companies trading in the island to pay tax in a desperate bid to raise money to close this gap. He did not know how to do this in 2005; he does not know this now and he won't know it on 1st January 2009 when the new tax is introduced.
Which means Jersey will go bust. It's that, or it will have to increase the GST (VAT) rate on its ordinary citizens from the proposed rate of 3% to 12.5% or more. As the current rate is 0% and this GST is charged on vastly more items than UK VAT is I predict a problem for Senator Le Sueur since up to 50% of all spending may be affected by it. I predict that people in Jersey will revolt. After all, would you see your standard of living cut by a significant amount just so that people not resident in your home country could tax evade in their country of residence at your expense?
It's obvious that the economic logic of tax havens is falling apart. Not surprisingly demonstrations against the GST are planned in St Helier in Jersey for 8th September. I hope significant numbers turn out.