Implementation of the Economic and Taxation Strategy - Email Exchange
2 April 2007
Dear Mr Brown
IMPLEMENTATION OF THE ECONOMIC & TAXATION STRATEGY
Thank you for the opportunity to hear a little of the developments in the implementation of zero/10.
I have the following comments:
As the point was made that very few high tax paying individuals invest locally I believe that the proposal that local income taxed at 20% is reasonable as I do not believe such a high wealth person who wants to invest locally looks at the tax rather than the opportunity for a local interest.
Consideration should be given to making capital allowances at 100% in order to stimulate local investment. Additionally this would simplify the taxation calculations and as retained reserves brought forward are ring fenced will have very little negative effect on the tax take in total. Local investment will hopefully bring local profits which in time will be subject to the payment of tax. This is similar to initial investment allowances given in the UK. This could encourage local companies to invest in the future and always be at the forefront of modern technology and innovation. I also believe that this initiative would be very positive for investment by our CGi members.
I am concerned at the loss of allowable interest on mortgages for property investment. This could act as a deterrent to local rental property and its availability. As trading businesses generally do not like to or cannot invest in both the trade and the holding of property we should encourage individuals with this capital availability to provide this financing locally and help support local business. It would be very counterproductive to local housing market and commercial property to dispense with this relief. I also believe that the loss of this relief is not positive for our CGi members.
Deemed Distributions
It is important that beneficial ownership and the use of nominees is not used to avoid payment of tax by hiding behind foreign nominees.
In the case of death of a shareholder does the tax liability initially fall on the deceased’s estate? When does the company pick up the liability if at all for the inability of the estates to satisfy that liability? This needs to be clarified.
Yours sincerely
Philip Duquemin
Chairman
CGi
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E mail response from Minister Lyndon Trott agreeing that interest relief in connection with property investment will continue to be available
8th May 2007
Dear Mr Duquemin
IMPLEMENTATION OF THE ECONOMIC & TAXATION STRATEGY
Thank you for your email of 2 April 2007 in response to the Policy Council’s recent consultation process which, as you know, was conducted through the Council’s Fiscal & Economic Policy Steering Group (FEPSG). The Group’s membership comprises, in addition to myself, the Chief Minister and Deputies Falla, Bell and Roffey.
One of the important issues that has been raised by you and others through the consultation process concerns the future treatment of interest relief on loans for property investment purposes.
The FEPSG has recently given very careful consideration to this matter and concluded that interest relief in connection with such property investment loans should continue to be available. We believe such a decision is consistent with the intentions of the States when the new Economic & Taxation Strategy was debated and approved last year.
Nevertheless, the FEPSG is mindful of the fact that there are circumstances where overseas companies invest in the island, benefit from our buoyant economy but pay no tax. This is an area that the FEPSG intends to consider in more depth (within a ‘property’ context) to determine what options may be available to address a potentially unfair situation.
However, for the avoidance of doubt, the States remains of the view that in accordance with decisions made last June, no interest relief should be available in respect of loans for luxury items such as boats, cars etc.
In the light of the above comments I trust that the serious and understandable concerns that you had raised with us have now been allayed.
Yours sincerely
Signed: L S Trott
L S Trott
Minster