I am aware that my latest comment on why Jersey and the Isle of Man will fail the EU Code of Conduct on Business Taxation has been well circulated in Jersey this weekend. I also hear that Senator le Sueur, its finance minister, has described it as a "rant" to which he will provide a full response in due course, the need for which by itself proves his description wrong.

I hope he will provide that commentary, but let me add further reasons why he should be worried before he in turn puts pen to paper. The first has been provided by Prof Sol Picciotto who is professor of law at Lancaster University and a colleague of mine in the Tax Justice Network. As Sol has noted:

Another point is that it's wrong to say that the EU Code is only about company rather than personal taxation. In fact, it's about business taxation.

Now this is very important, and is further reason why Terry le Sueur in Jersey and Allan Bell in the Isle of Man are wrong to pin their hopes on moving their ring fences out of company taxation and into what they consider personal taxation. The move is irrelevant: in both cases business profits remain subject to tax. What will happen under their proposed arrangements is that the basis used will be dependent on whether the entity charged to tax is owned by local residents or not. If the business is locally owned then a positive tax rate is used. If it is not locally owned then it is charged at 0%, but as another commentator noted this weekend, that's still tax, even if nothing is paid, a point well established in European VAT law. Taking into consideration the actual wording of the EU Code, it is completely irrelevant whether the point of charge to tax is in the personal or corporate domain. There's still a ring fence relating to business taxation in the proposed systems. And the different tax rates are applied solely to protect the national tax base to the disadvantage of the domestic based market. This is in flagrant breach of Code Section B2.

My second point is so glaringly obvious it has not occurred to me to state it before now. There is very real concern in Jersey that whilst locally owned businesses operating within the Island will be subject to tax under its new tax regime the very same businesses would if owned by non-residents not be subject to tax. As example, if a shop in St Helier is run by a company and that company is owned by local residents then the deemed distribution arrangements to ensure that tax is paid that Jersey is proposing will apply. But the same shop operating in identical fashion if owned by non-resident shareholders would have no tax liability at all, a fact which is causing considerable local upset and no little concern to the political classes.

But the real point is this: by itself this debate proves that there will still be a ring fence when the planned changes are introduced, and one so potentially effective that enormous effort is being expended to find ways round it so that the national tax base can be extended to those non-residents who will trade in Jersey in future and who will secure a massive economic advantage over local businesses as a result. That potential advantage is so big that on 7 November the Jersey Evening Post noted that a Committee of the States of Jersey had warned that the new zero-ten tax structure could lead to a serious decline in the number of Jersey-owned businesses with overseas corporations taking over from loyal local employers and that the new rules could tempt many Jersey-owned businesses to transfer ownership overseas to dodge paying tax.

The conclusion is simple: Jersey will still have a ring fence with regard to business taxation. It knows it. In that case how can it believe itself to be EU compliant? And why should it think the EU will deem it to be so?