Shareholders will be taxed on basis of company profits

Shareholders will be taxed on basis of company profits

The possibility was first mooted at the end of last year as one of the ways of making up the tax take that will be lost when the Island introduces a zero rate of corporate tax in 2008.

he measure will also ensure that Jersey residents cannot seek to avoid paying tax by transferring income-producing assets to companies.

he tax will not apply to public companies quoted on the stock exchange.

But it will affect the directors and shareholders of local non-financial services firms, who would otherwise be paying zero corporate tax.

Finance and Economics has already stated that financial services companies and utilities will be subject to a separate tax of around ten per cent.

he ‘look through’ provision is one of two possible measures outlined by Jersey’s Comptroller of Income Tax, Malcolm Campbell, in a paper for Finance and Economics’ fiscal review working group.

he other alternative is the ‘deemed distribution’ measure where shareholders would be taxed on the level of dividends which the Income Tax Department deemed to be reasonable.

This system also allows a company to retain a percentage of its profits for reinvestment.

r Campbell said the look-through system was closer to what was already in place, less complicated to execute, and would bring in more revenue, but he stressed the final decision would rest with the Finance and Economics Committee.

e said the look-through proposals were ‘not practical or possible’ for large publicly-quoted companies.

‘It is a very complex issue,’ he said.

‘This is only part of the jigsaw that will form the final strategy.

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