NEW super-rich residents will pay at least £250,000 a year in income tax, if proposals lodged by the Treasury Minister are approved by the States.
Treasury Minister Ian Gorst has tabled proposals to increase the minimum tax payable by new 2(1)(e) residents under the High Value Residency Scheme.
Previously, to be eligible for so-called high-value residency, wealthy immigrants had to be able to able to pay a minimum of £170,000 in income tax annually, or 20% on the first £850,000 of their income generated anywhere in the world. Additionally, they were required to rent or buy houses worth at least £2.5 million or flats costing more than £1.25 million.
Under the proposals, the minimum tax requirement would rise to 20% on the first £1,250,000 of worldwide income. This is a 47% increase on the minimum amount of tax paid.
The minimum property price has also risen to £3.5 million for houses, and £1.75 million for apartments.
In addition, applicants would have to have a net worth of at least £10 million, excluding their primary place of residence.
The proposed new legislation follows a review by the Housing and Work Advisory Group, chaired by the Chief Minister, which examined the available evidence, including the number of applications and house-price data, and considered the views of recent applicants and industry professionals.
Should the proposals be approved, the proposed new tax regime will come into force on 14 July 2023. The debate is due to happen in July.
Those 2(1)(e) residents who are approved before the legislation comes into force will continue to be taxed at their current rate.
The government estimates that the proposed changes would generate an extra £1.2m per annum in tax.
The Chief Minister, Deputy Kristina Moore, said: ‘This government welcomes people who generate wealth and contribute to sustainable economic growth, whether home-grown or those who want to make Jersey their home and become part of our community.
‘We believe we have a package of measures that will maintain a stable and supportive environment for relocation and investment, while requiring a modest increase to their contribution to the public purse.’
Garry Bell, a partner and the head of tax at PKF Chartered Accountants, has experience in helping high-value residents move to the Island. He had some concerns that a change in the minimum contribution might lead to Jersey becoming less attractive to wealthy immigrants, as the Island risked becoming more expensive than the competition.
For instance, he said that new residents to the Isle of Man were required to contribute only £200,000, while in Guernsey they contributed £50,000 for the first three years and £150,000 after that.
He said: ‘The analogy I would use is that if you had a BMW and an Audi, and the BMW is 20%, more expensive than the Audi, what you’re saying is, why would I pay the extra? They’re both good German cars. You won’t realise the Island is a Rolls-Royce until you get close.’
Mr Bell felt it was important to attract wealthy immigrants to the islands, not just because of their material benefits in terms of income tax and GST, but also because of their ‘intangible’ benefits. For instance, the opportunity offered for mentorship and networking.
He said: ‘For example, you could have a retired individual who’s been extremely senior in a global bank. You can imagine what their little black book is like.’
Deputy Sam Mézec, who called for a complete ban on super-wealthy immigrants late last year, has criticised the change as simply ‘smoke and mirrors’. He said that the review ‘focused on people with a vested interest in the scheme, didn’t highlight the specific economic pros and cons associated with it and is predicated on the received wisdom of those in government who view the policy as positive despite having no evidence beyond anecdote’.
The Reform Jersey leader also felt that the review of the scheme failed to address its ‘moral issues’. He said that allowing the super-wealthy access to their own tax system and fast-track residential status was ‘discrimination pure and simple… in other circumstances we would view this as a moral outrage’.
Former Economic Development Minister Deputy Lyndon Farnham was ‘broadly supportive’ of the proposed change, stating that it was important to ‘have people of significant financial means who could contribute to the Island in a meaningful way, which they do’. The higher minimum contribution, he said, would ensure that ‘we get and continue to get a really good calibre of people coming to the Island’.
His only concern was that formal requirement for applicants to have £10 million in wealth was ‘a bit low’. He stated that, during his tenure, the figure of £50 million was used, of which £10 million of that should be in cash. This was to ensure that applicants ‘were prepared to commit to the Island’.