The Island’s authorities expect to find out early next month whether Jersey will be added to a blacklist of ‘non-co-operative jurisdictions’, which is being compiled by the EU Code of Conduct Group on business taxation.
Jersey and Guernsey are among 92 jurisdictions currently being screened by panels of experts, with a view to considering who should be added to the list.
During a public hearing last week, Deputy John Le Fondré, who is the chairman of the Corporate Services Scrutiny Panel, asked Senator Bailhache to provide an update on the matter.
‘The EU has announced its wish to create this list of non-co-operative jurisdictions by the end of the year,’ said Senator Bailhache. ‘We have not yet had the opportunity to engage face-to-face with the Code of Conduct Group but we hope that will come before any decision. My own view is that it would be extremely unfair if a decision was made without giving a jurisdiction the opportunity to address any concerns there might be.’
Deputy Le Fondré asked whether there were any UK representatives on the Code of Conduct Group.
‘Yes and it has been very helpful to us. But one of the things on our minds is they are not going to be there in 18 months,’ replied the minister. ‘While we can rely on the UK at this stage, we will need to address any concerns that the EU have directly with them [post-Brexit].
‘We need to build up a rapport with the Code of Conduct Group because when the UK leaves the EU we will be on our own.’
Panel member Deputy Simon Brée pointed out that having a zero corporate tax rate was one of the criteria for being added to the blacklist and asked whether that meant Jersey would be added, due to its zero-ten tax regime.
The minister said: ‘The fact that we have a zero tax rate is not a reason for putting us on a blacklist. Tax is not a competence of the EU. What the European Commission has done is extend corporate tax rates as a gateway for asking another question, which is whether companies have
economic substance and are not just a cypher for taking tax out of an EU member state.’
He added that the EU had not provided a ‘satisfactory’ explanation of what ‘economic substance’ means, which he believes should prevent Jersey from being blacklisted.
If Jersey is added to the blacklist, EU member states will be required to apply sanctions to the Island, which will be decided by each national government and could include fines or trade restrictions.
