Public Finances: How can we make them sustainable and invest in Guernsey's future?

Changes in Guernsey’s population are driving demand for some public services, especially health care and pensions. As costs rise, we also need to address an under-investment in Guernsey’s infrastructure, including housing, education and health facilities.

The change in the make-up of Guernsey’s population is one of the biggest challenges we face over the coming years. As a result, a funding shortfall is forecast to rise to about £100m a year by 2032.


Changes to the make-up in our population

Graph showing the number of women and men in 1971, 2020 and a projection for 2050

All Islanders make a valuable contribution to funding our public services and have done so throughout their lives.  But inevitably as we each get older we use more services.  This chart shows how much on average people in each age group contribute compared to the cost of the main services they use.  As the number of people in the 20 to 64 age groups decreases and the number in the 65+ increases, it reduces income and increases costs.

Estimated taxes paid and services used per person by age


What do we want to achieve?

What are we trying to achieve


Investing in our infrastructure

The States aims to invest an average of 2% of GDP in the Island’s infrastructure each year, so that our public facilities including education and health facilities, ports, sea defences and other essentials are fit-for-purpose.  However for years, the States have significantly under-invested.

Historical capital expenditure

There is now an increasingly urgent need to make investments, to safeguard the Island’s future.

However the pressures on public finances, driven because of the growing demand from a changing population mean we cannot afford to do this at the moment.  Proceeding with big infrastructure projects now, without enough income to fund them, would quickly deplete the Island’s reserves.  Without healthy reserves, future generations are much more at risk from unexpected developments that could require funding to protect and support the community.

What can the States do about it?

The Funding & Investment Plan

In October, the Policy & Resources Committee will lead a debate in the States on the Funding & Investment Plan and Capital Portfolio. Together these address how public services and infrastructure investments are funded, and which infrastructure projects should go ahead. The Funding & Investment Plan policy letter is available here

The Committee will put forward three scenarios.

They will recommend Scenario 3, but it will be a decision for the States Assembly on which scenario they believe is the best plan at this time.

All of the scenarios involve the following core elements:

  • An additional £15m per annum from corporate taxes, largely from the OECD’s ‘Pillar 2’ initiative
  • £10m a year in new income from transport related taxes, initially an annual charge on vehicle ownership
  • An expectation that £10m of annual savings in the cost of public services can be delivered over the next 5 years
  • Annual investment in the development of policy of £3m a year to ensure that government priorities for improvement can be progressed
  • A minimum investment in major capital of £95m over the remainder of this term on those projects which are already ‘in flight’
  • Continued investment in routine capital replacements of £20m per year, over the rest of this term
  • Use of £160m of the proceeds of the existing bond towards the delivery of capital priorities
  • Preserving the limited States reserves this term to give some financial resilience and ensure the next States have funding available for their priorities

But there are key differences between the three scenarios, outlined below:

Scenario 1
  • This scenario gives States Members an option of a capital portfolio which does not require any new borrowing to be taken out
  • It allocates a further £95m to major capital projects including housing
  • This scenario does not enable the necessary investment in the hospital to deal with the ageing population or in the agreed education developments
  • Limiting the capital expenditure in this scenario would bring the average in this term down to about 2% of GDP
  • This scenario is affordable in the short term but does not put States’ finances on a sustainable footing
Scenario 2
  • Scenario 2 allows Members to increase the level of capital expenditure in this term by £345m on top of the core ‘in flight’ projects
  • This is afforded in the short term by taking out £200m of new borrowing and using the money available in the Health Service Reserve
  • This means that both the education and hospital projects can continue as planned
  • This level of borrowing is affordable from the additional income generated through the core package
  • This scenario allows more of the necessary capital investment and is affordable in the short term. However it doesn’t put States’ finances on a sustainable footing
Scenario 3
  • In addition to the revenue raising and cost reduction measures in the core proposals, this scenario introduces the full package of tax measures previously developed by P&R (these are explained fully further below on this page)
  • This additional income puts States finances on a sustainable footing
  • It also allows additional borrowing of £150m (on top of scenario 2) to be taken out to address all of this States’ capital priorities
  • Given the additional income generated, this scenario allows for £2.5m a year to be allocated for new initiatives that deliver social and community benefits (like the arts projects or home insulation)

The Committee presented the Funding & Investment Plan at a press conference, and invited questions from the media on Tuesday 5 September 2023. You can watch the full press conference here:

Why is the Policy & Resources Committee recommending scenario 3?

Like all the scenarios, Scenario 3 will see £10m - £16m in reduce costs across the public sector.  It will also see substantial additional funds raised from businesses through corporate tax measures and transport related taxes, amounting to around £25m per year.

But it goes further, with a major reform to the overall tax and social security systems, making them more progressive so they are fairer on low-income households. 

This reform includes:

  • A new 15% Income Tax band on everyone’s income up to £30,000. For someone on median earnings (about £37,000 a year) this would reduce their tax bill by about £900 a year.
  • An increase in the personal income tax allowance of £600 which would reduce people’s bill by £120 a year.
  • A restructure of Social Security contributions to give everyone an allowance. This would make the system more progressive and mean that an employed individual on median earnings would be about £600 a year better off in take home pay.
  • A broad-based GST of either 5%, or 6% excluding food. This would not apply to rents and mortgages. This would be expected to increase household costs by about 3.4%, which would be about £1,100 for someone on median earnings. For the average low-income household, this is more than off-set by reductions in their income tax and social security contributions and increases in pensions and income support.
  • Pre-emptive increases to pensions and benefits to anticipate the impact of inflation.
  • A scheme to provide financial support to certain low-income households outside of the benefits system.


Independent Fiscal Policy Panel report

An independent panel of economists, the Fiscal Policy Panel, has carried out an assessment of the Funding & Investment Plan.

The Policy & Resources Committee invited the panel to carry out their review to provide the community and States Members with as much confidence as possible in its forecasting, that the right fiscal challenges have been identified, and an independent view of whether the proposed solutions are viable and sustainable.

Read the Panel’s full report.

How would the tax package in scenario 3 effect me?

Many people rightly want to know what does scenario 3 mean for them? Everyone’s situation is different, but we have prepared 26 case studies of different types of households on different income levels to give you a good idea of what it’s likely to mean for you. The case studies can be viewed by clicking the link below:

Case Studies

NOTE: The 2021 baseline is used for the following case studies.  This is because this is the latest point before the current phased increases in social security contributions began. The package presented includes a restructured social security contributions system which will replace the phased increased.

Comparing the Scenario 3 tax package with an increase in income-based taxes

A frequently suggested alternative to raising revenue through the proposed sustainable tax package in Scenario 3 is increasing income-based taxes.  The Policy & Resources Committee has considered this option, and produced a short report entitled ‘Why not just increase income tax?  A brief comparison of the progressive model against an income-only based alternative.’

You can read the report here: Why not just increase income tax?

How will cost reductions be achieved?

The work to identify cost reductions of £10m - £16m per year is being led by sub-committee.  The following are members of the Sub-Committee:

  • Deputy Dave Mahoney (Chair)
  • Deputy Sasha Kazantseva-Miller
  • Deputy Carl Meerveld
  • Deputy Simon Vermeulen
  • Mr Dave Beausire

As well as engaging with States Committees and individual Deputies, the Sub-Committee has carried out a survey for all Guernsey and Alderney residents inviting their suggestions for how the cost of public services should be reduced. 637 people responded to the survey, providing 1,416 suggestions.

A sister survey was also carried out for public sector employees to make suggestions. 196 people responded to this survey, making a total of 394 suggestions.

The Sub-Committee has published some initial insights on the broad themes that are beginning to emerge as its analysis of the suggestions gets under way.

The Sub-Committee is continuing to assess the responses, and will make recommendations to the States for where the reductions should happen in the early part of 2024.


Review of other tax options

The States also agreed a sub-committee should be formed to look at other ways of raising revenue, including progressing the work underway to raise more money from the corporate sector, while maintaining Guernsey’s competitive position and compliance with international standards. As part of this, the sub-committee was directed by the States to engage with industry, Jersey and the Isle of Man to develop proposals.

This work will build on an independent report produced by EY as part of the Tax Review.

The sub-committee is led by Deputy Mark Helyar, Vice-President of the Policy & Resources Committee.  Also appointed to the sub-committee are:

  • Deputy Lyndon Trott
  • Deputy Nick Moakes
  • Mr Andrew Niles

The work of this sub-committee to date has involved:

  • Exploring options for changes within the current domestic TRP system
  • Reviewing other options around property taxes
  • Exploring scope for raising additional revenues from the corporate sector through registry fees and/or a business levy
  • Examining the extent of ‘rolled up profits’ and whether any steps need to be taken to encourage distribution
  • Looking at the possibilities for extending the scope of the current 10% and 20% rates of income tax for corporate entities
  • Launching a consultation on a possible transaction tax similar to the ‘Tax D’abonnement’ in Luxembourg


2024 Budget

The 2024 Budget has been published, and will be debated by the States of Deliberation in November. 

While the Funding & Investment Plan is where the States will be asked to make longer-term decisions about the sustainability of public finances, reforming the tax system and how to fund investment in public infrastructure, the 2024 Budget must also take into account the current unsustainability.  It includes proposals for next year that are geared towards raising more revenue from those who can most afford it.

The full Budget, and a summary ‘Budget on a Page’ can be found at


What is the States' current financial position for 2023?

Based on performance in the first seven months of the year and forecasts to the end of the year, it is now expected that the States will end the year around £18m ahead of budget.  

This is partly because of better than expected ETI (individual income tax from employment).  This increase in outturn is a result of both median earnings rising faster than anticipated and employment levels increasing.  The improvement in ETI income alone is likely to mean an additional £10m against the budgeted position.  Other categories of income tax are also doing better than previously expected, with interest rate rises positively impacting banking profits.

Document duty is likely to finish the year £7m below the budgeted figure, due to a slow down in the housing market following extremely buoyant years since COVID.

Other areas of income are largely in line with budget expectations.

With regard to expenditure, the States’ costs, excluding pay, have been heavily impacted by inflation, with the cost of most goods and services rising.  This is leading to several Committees forecasting small overspends.

Pay costs are likely to be in line with the budget overall, but attention should be drawn to the situation at Health & Social Care which faces an overspend of £2.4m on staffing.  Recruitment remains a significant challenge in this area, and agency staff are needed to ensure essential services can continue to be safely delivered.  This overspend is offset this year by vacancies in other areas which have been difficult to fill in the current market. 

The overall improved position means the projected surplus for 2023 is now around £24m after allowing for proceeds from the sale of property and allowing for the loss at Guernsey Ports.  However, as reflected in the 2023 Budget, this is a revenue surplus position only and does not reflect either returns on investment or the cost of required spend on Guernsey infrastructure.  After taking account of investment returns and capital expenditure in line with the States’ target (2% of GDP), the forecast position for 2023 would still be a deficit, albeit a reduced one of £20m.

The Funding & Investment Plan, which looks at the funding of capital projects and public services over the coming decade, has been informed by forecasts compiled earlier in the year. However, while there are some differences between income and expenditure, the net 2023 position used as the basis for the projections is in line with this latest 2023 forecast.

Further details of the States' financial position have also been published online.

Why do we have a shortfall in funding for public services?

There is an increasing gap between the revenues that the government receives from taxes and the cost of the services and infrastructure that these taxes pay for. This is largely because Guernsey has an ageing population, meaning that more and more people are needing the long-term health and care services and pensions that the States provide. At the same time, as more people reach retirement age, there will be a decrease in Guernsey's working population, whose income tax and social security contributions cover a lot of the cost of public services. The health and social care services being put under pressure are some of the most important services that the States provide but they are also expensive. As such, this gap is forecast to increase and presents a long-term issue for the States. It is currently foreseen that the gap in States finances could reach £85m a year unless action is taken. 

We have been anticipating this for many years and the detailed financial analysis included in the Funding & Investment Plan has illustrated in more detail how of these effects are already being felt.  We are already seeing smaller surpluses, which means less money is available to invest in Guernsey’s infrastructure.  We have some short-term solutions for that, but we need to find a sustainable and long-term solution.

What does an ‘ageing demographic’ mean?

The ageing of the population is something that began back in the 1940s. After the end of the second world war there was a period where fertility rates were high and people had a lot of children. Health care was also improving so more of those children survived into adulthood creating a big generation known as the 'baby-boomers'. In the early 1970s, with wider access to contraception and improving living standards, people stopped having so many children. The number of children born per woman fell below 2 (the fertility rate required to maintain a stable population) and it has stayed below that level ever since. The very long-term implication of this change is a fall in the size of the population, but it takes many decades for that to work through.

This means there are more people in the baby-boom generation who are currently retiring, than there were in their parents' generation, or are in their children or grandchildren’s generations. That means that the number of people below pension age will fall (unless it is topped up by migration) because there are fewer young people entering the workforce than the number of people retiring. It also means the number of people above retirement age is increasing, particularly since improved living standards and healthcare also means that people are living longer in retirement. In 1965 when the States' pension in its current form was introduced average life expectancy was about 72 years. Today, the average life expectancy in Guernsey is 83 years. That presents a challenge because generally, people pay the most taxes while they are working, and they need the most support from public services towards the end of their life.

As more people retire, we need to provide more pensions and health care services. For example, between 2010 and 2020 the number of people claiming a States' pension increased from 15,000 to 18,700 and it might reach 22,000 by 2040. As a result, the annual cost of paying pensions increased from £82m to £134m between 2010 and 2020 and this cost will keep going up, unless changes are made to what people are entitled to. We see similar impacts in health care provision because we need to provide more procedures like hip and knee replacements and community care services. This isn't the fault of older people, who are valued members of the community and are entitled to care and support when they need it. However, it does mean the cost of providing that support is increasing.

At the same time the downward pressure on people of working age places pressure on the amount of taxes we raise from our community. Over the next 20 years that could mean a reduction in tax revenues of up to £30m a year. This workforce will also need to deliver the increased volume of care services, and that will mean that more nurses and carers are required. The potential for a fall in the size of the working population is therefore a further issue that needs to be addressed.

Why is the Policy & Resources Committee bringing these measures back when GST was rejected by the States in February?

The Committee has taken the last few months to take a very detailed look at the likely income and expenditure of the States and the balances on our reserves over the next 10 years. This clearly shows that action needs to be taken and the Committee feels it is its duty to propose a sustainable financial package to the States of Guernsey.  There is a need to proceed with major capital projects, but given Guernsey’s public finances are not sustainable, these cannot proceed without a funding model being agreed as soon as possible.

Why is the same package being presented again? Why isn’t something else being proposed to raise the revenues?

The Policy & Resources Committee has spent the whole of this term looking at options around taxation. The Tax Review Sub Group – made up of Deputies Helyar, Mahoney and Roffey and non States Member Mr Mark Thompson – explored all possible options including income tax, corporate tax, inheritance tax, capital gains etc etc and came up with this package as the best progressive solution. P&R remains convinced, based on the evidence, that this is the fairest solution. 

However, there are additional steps being taken as a result of the February Tax Review debate.  In particular, the Committee are working to identify ways of reducing the cost of public services by £10m - £16m per year, and recommendations on this will come forward in early 2024.

Why are you considering a Goods and Services Tax instead of looking at alternatives?

Extensive work has been done this term looking at a wide range of options, to find the best solution for achieving long-term financial sustainability in a way that is fair and progressive and maintains a competitive economy. The Policy & Resources Committee, which is responsible for overall public finances, raising revenue and setting budgets, still believes that it is the best solution if it is accompanied by other tax reforms to make the overall system more progressive. That includes restructuring social security contributions and better tax allowances for those on lower incomes.

A Goods and Services Tax is one of only two options that can realistically deliver the scale of revenue needed to fill the shortfall. The other option would be increasing the taxes on Islanders’ income. Income tax and social security contributions (both of which are calculated base on people’s income) are already our biggest sources of revenue, and we lean very heavily on them. That makes our tax system vulnerable to certain economic shocks and it also puts most of the burden on the working population, which has shrunk over the last decade and is forecast to continue shrinking. A Goods and Services Tax would distribute tax revenues differently, spreading taxes out more widely to more people, including visitors to the Island, those who support their lifestyle using their capital rather than their income and businesses, all of which spend money on goods and services and therefore would contribute more in tax. The more they contribute, the less needs to be raised from working Islanders.

Guernsey is one of the very few places in the world that doesn't have some form of Goods and Services Tax at the moment. Because many other jurisdictions like Jersey and the Isle of Man have a Goods and Services Tax of some form, introducing one is the least likely of the suggested tax options to damage Guernsey's competitiveness, which is important for local businesses and local jobs.

There are two other options presented in the F&IP which present smaller increases in taxes, but they are not sustainable in the long term. If the States opt for one of these packages, it may be enough to get us through the rest of this term, but the underlying issue will remain and it will need to be discussed again as a matter of urgency at the beginning of the next States Term

Why hasn’t the Policy & Resources Committee implemented all the measures agreed after the Tax Review debate before coming back to the States?

There were numerous resolutions following the Tax Review to investigate and explore a number of opportunities. These will all take time to develop and the Policy & Resources Committee has assumed a level of income or savings will come from these. All the workstreams are still being progressed and will report back in due course.  But it is not possible to agree a way forward on the major capital projects the States needs to progress, including the hospital modernisation or education programme, without agreeing a comprehensive funding plan now, which is why the Committee cannot delay asking the States to make this decision.

Can’t we be more efficient and spend within our current means?

It is the responsibility of all Committees across the States to identify efficiencies and to ensure value for money where possible. But in addition to that the last Tax Review debate saw the States agree to create a sub-committee to look at public spending. It has engaged with States Committees, public sector employees and the whole community through public surveys and will make recommendations on how to reduce the cost of public services by £10m - £16m a year, in early 2024. This reduction is a key part of the all of the options the Policy & Resources Committee is presenting to the States in the Funding & Investment Plan.

However, Guernsey spends less on public services per person than the UK, Jersey or the Isle of Man. As demand rises as a result of the ageing demographic, some costs are unavoidable. While cost reductions help to slow the rate at which costs increase, the amount spent on public services is already relatively low and there is not enough scope to continue providing essential services, investing in infrastructure and maintaining reserves solely through the finite amount that can be found through cost reductions.

What’s in this package for the community?

First of all, many people in the community will have more money in their pockets as a result of this package through the changes to income tax and the introduction of a personal allowance for social security contributions. That’s after they’ve had to incur a GST on their shopping. In addition, the revenue raised through this package enables the States to support social and community benefits worth £5m over the remainder of this term and £10m next term

How do we know we can trust these predictions?

The information on public finances, and the modelling for what is likely to happen to them in the future is carried out by impartial, qualified accountants, economists and tax experts in the States Treasury.

In addition, the Policy & Resources Committee has reformed the independent Fiscal Policy Panel.  This panel of economists are reviewing the modelling to check the assumptions made in them are the right ones.  They will also review the proposed plan to check if it is viable.  This panel will report back in October before the debate, and their report will be shared with islanders.

Can we bring in more working age people into Guernsey?

The States reviewed its policy around population and migration during 2022. The direction provided was to seek to maintain the working population by supporting a higher level of net inward migration of working age people than we have seen on average over the last 15 years. If successful this could provide a boost to tax revenues and contribute to reducing the size of the deficit. In fact the assumptions made in the Funding & Investment Plan include a slightly higher assumption of net migration than the Tax Review, reflecting the fact that migration has been higher than average over the last few years.

However, higher levels of migration comes with many considerations such as the Island’s small geography, the impact on housing and infrastructure and the impact a larger population might have on the cost of providing services.

Who is going to pay?

Both households and businesses will likely need to pay more. This is because the main ways that the States can increase revenue is through an increase in taxes on income or the introduction of a Goods and Services Tax. This may be supported by other changes to taxes such as corporate tax, taxes on vehicles or TRP.

However, this does not mean that everyone will be worse off. The Tax Review put forward models where some people, particularly lower earning households, may be better off, even after the impact that a GST may have on prices. This is because the models recommend measures to protect low- income households. This includes a restructure to the social security contributions system, which is currently not as progressive as it could be, and an increase in personal tax allowances so people pay out less in taxes from their income. It could also include measures to increase pensions and benefits to pre-empt the impact that a Goods and Services Tax might have on inflation.

Can’t rich people pay more?

The package of measures the Policy & Resources Committee is recommending would be progressive, which means that those with higher incomes would, in general, be expected to pay more as a percentage of their income. This is because this package will reduce the amount of tax and contributions paid by lower income households which means most will actually be better off.

Higher rates of taxes on high earners have been considered but they need to be set at quite high rates and begin at quite low thresholds to raise significant amounts of revenue.
The richest 6% of households in Guernsey already pay around 25% of all the tax revenue we receive from households. Higher tax rates for higher earners would focus the majority of the additional revenue raising on this group and this would further increase our reliance on this small group of households while at the same time making Guernsey a less attractive place for them to live. As a strategy this would be quite high risk and place our tax system out of step with our closest competitors.

Can’t companies pay more?

A review of company tax is happening as a parallel work stream. World governments have been working on an international framework for taxing big Multinational Groups seeking to address issues that are linked to the increasing globalisation and digitalisation of the economy. This aims to ensure there is a minimum internationally recognised tax rate (15%) for very large groups with a global revenue above EUR 750m. It would also mean the biggest groups (with global revenue above EUR 20bn) are taxed where their customers are, not necessarily where the company is based. We expect this to go live in Guernsey from 2025 and that it will raise a minimum of £10m.

The States are also looking at other ways companies might pay more, by looking at things like the fees applied for registering a company, and whether it might be possible to extend the application 10% and 20% tax rates. If a GST is introduced it is also anticipated that the finance sector would be subject to an International Services Exemption Fee, which could raise as much as £8m.

Are you sure we need to spend 2% of GDP (£60-70m) a year on capital? Couldn’t we spend less then there wouldn’t be a deficit?

The very much reduced portfolio in scenario 1 equates to just over 2% of GDP in this term and does not include the hospital modernisation or schools project in it. We have underinvested in capital for a number of years and our public assets and infrastructure are looking tired and are in need of repair or replacement. We need to look after, repair and replace our assets for the benefit of the community. If we don’t, the need will not go away, we will just store up more problems for the future.

Why isn’t Scenario 2 the best one? It allows the hospital and education capital projects to be completed, without a GST.

Scenario 2 is affordable for this current States, but it is not sustainable. It does not resolve the deficit and simply leaves the problem for future States to resolve with rapidly diminishing reserves.

The Policy & Resources Committee already had the authority to borrow money. With hindsight was it a mistake not to have already taken out borrowing when rates were low?

No. The Committee’s strong view is that borrowing should only be taken out when it can be justified and is needed. It is risky to take out borrowing before it’s needed just because rates might be attractive. Also, when you borrow money you have to have the income to be able to repay it. Given the deficit in States’ finances at the moment, the current small level of surpluses does not support the repayment of debt.

Will a Goods and Services Tax mean more admin and more cost for businesses?

The Goods and Services Tax being discussed is an input/output tax. This means businesses would charge the tax on the products that they sell, and remit that amount, less any tax they paid on their supplies to the States. This means that while the actual cost of the tax is ultimately paid by customers, businesses are involved in its collection and that means some administrative cost. Because this is common around the world, modern accounting and till systems have modules to help businesses manage this.

In most systems, very small businesses are not required to register for Goods and Services Tax. This means that they don't need to submit quarterly returns or charge the tax to their customers, but they also can't claim back the tax that they pay on their supplies. In the UK the threshold for VAT registration (a GST equivalent) is a business turnover of £85,000; in Jersey it is much higher at £300,000. This high registration threshold helps protect smaller businesses from the cost of administration and is something that will need to be considered further in the next stage.

Keeping the system simple, with a single rate and a limited number of exemptions could also make the quarterly returns process easier for both businesses and government.

Will a Goods and Services Tax disadvantage local retailers competing against online retail?

Imported goods will be subject to a Goods and Services Tax if they are above a certain threshold (known as a de minimis). If we take the same approach as Jersey, businesses selling more then £300,000 worth of goods into Guernsey from outside the island will be required to register for GST and collect the revenue on the sale. This means if you buy from the larger websites the GST will be included in the price even if it below the de minimis. This will ensure that, for many goods, local businesses will be at no more of a competitive disadvantage than they are now.

The threat to high-street purchasing is a concern for all jurisdictions, but there are still different contributing factors to be considered and there are reasons why consumers will still continue purchasing goods on the high-street rather than online.

The States have already started consulting with businesses and will continue this engagement to ensure the least possible negative impact on local businesses. This will include determining what the right de minimis threshold should be.

If corporate tax rules are changing globally, should we not wait to see if we can raise money that way?

We anticipate that at least £10m a year will be generated by the application of the OECDs Pillar 2 rules from 2025. This will apply an effective tax rate of 15% to companies with global revenues of more than €750m. This will mean that a number of companies either based in Guernsey or with subsidiaries here will contribute more than they do now.

Can we just undo zero-10?

Company tax is an important factor for many businesses when deciding where to locate and who to do business with. It is important for Guernsey to retain a tax system that is competitive with other jurisdictions.

Before Zero-10 was introduced, Guernsey had a 20% company tax rate but with some exemptions for non-residents. However, as international standards changed this system was deemed non-compliant with international rules and could no longer be continued. Guernsey, as well as other jurisdictions, had to decide how it was going to change its tax system whilst remaining attractive for existing and prospective businesses. When the Isle of Man made the decision to introduce a 0% headline company tax rate, Guernsey and Jersey followed, whilst retaining a 10% or 20% rate for a small number of businesses such as banks real estate and regulated utilities. If we had not Guernsey could have lost a lot of its financial service sector, now the largest economic sector in the Island which generates the most jobs for Islanders.

Since the introduction of Zero-10 many changes have been made to offset its consequences (including the expansion of the 10% rate to most regulated financial services businesses) and have meant the States have been able to regain a large amount of revenue from corporates, whether directly or indirectly by increases in commercial TRP rates and employer contributions to Social Security.