Business backing for ‘Tesco Tax’ on foreign firms trading in Jersey

Friday 20 November 2015

The plan to squeeze some tax out of foreign businesses trading here but not paying any tax on profits has won support from an unexpected source – the business community.

The Institute of Directors has thrown its support behind Treasury Minister Alan Maclean’s plan to review an Isle of Man-style ‘Tesco Tax’ based on big retailers making more than £500,000 per year.

Because the ‘Zero-Ten’ company tax system only levies company tax on finance and utility firms, the only way that other companies pay tax is through Income Tax on local shareholders taking company profits, or GST. That means foreign-owned companies such as Normans, de Gruchy and BhS don’t pay any company tax here, although they do pay Social Security contributions, and the States take tax from their employees.

The ‘Tesco Tax’ proposal in the Isle of Man – named after the supermarket group because it’s the largest non-local business operating there – is levied on major retailers with annual profits of more than £500,000, and has been assessed and approved by the EU Code Group that reviews tax fairness.

It’s expected to make £3.5 million per year there, and a similar proposal is estimated to make £2 million per year in Guernsey.

Wendy Dorman, a tax expert and the Chair of the Jersey branch of the Institute of Directors, welcomed the move and said, “...it’s the right thing to do."

In a blog in September, she described getting some revenue from firms currently allowed to trade here without pay any tax at all as “a priority”.

She said: “The IOD welcome the news that the Treasury Minister is looking into an extension of the 10% tax band to make sure that foreign owned companies operating in Jersey make more of a contribution.

“This measure may not raise significant levels of tax but it will address one of the more controversial elements of the zero-ten system and it’s the right thing to do.”