States Meeting Transcript - 22/07/2011

STATES OF JERSEY OFFICIAL REPORT FRIDAY, 22nd JULY 2011

PERSONAL STATEMENT......................................................................4

1. Statement by Deputy M. Tadier re resignation from Scrutiny Panel...................4

1.1 Deputy M. Tadier :.......................................................................4

PUBLIC BUSINESS - resumption................................................................5

2. Draft Income Tax (Amendment No. 39) (Jersey) Law 201- (P.113/2011)...............5

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):.......................6

1. Deputy R.C. Duhamel of St. Saviour:....................................................8
2. Deputy S. Power of St. Brelade : .........................................................8
3. Deputy T.M. Pitman of St. Helier:.......................................................8
4. Senator S.C. Ferguson:..................................................................8
5. Deputy G.P. Southern of St. Helier:......................................................8
6. Deputy P.V.F. Le Claire of St. Helier : ...................................................9
7. Senator F. du H. Le Gresley:............................................................10
8. Deputy J. B. Fox of St. Helier:..........................................................11
9. Deputy C.F. Labey of Grouville :........................................................11
10. Senator F.E. Cohen: .................................................................12
11. Senator T.J. Le Main:................................................................13
12. Deputy M. Tadier :...................................................................14
13. Deputy A.E. Jeune of St. Brelade:...................................................16
14. Deputy P.J. Rondel of St. John:......................................................17
15. Deputy M.R. Higgins of St. Helier:..................................................17
16. Deputy E.J. Noel of St. Lawrence : ..................................................19
17. Deputy F.J. Hill of St. Martin:.......................................................20
18. Deputy D.J.A. Wimberley of St. Mary : ..............................................21
19. Deputy A.K.F. Green of St. Helier : ..................................................24
20. Senator A.J.H. Maclean:.............................................................25
21. Deputy J.A. Martin of St. Helier:....................................................26
22. Senator P.F.C. Ozouf : ...............................................................27 Senator S.C. Ferguson (Chairman, Corporate Services Scrutiny Panel):......................34

2. Senator P.F.C. Ozouf :..................................................................34

3. Draft Income Tax (Amendment No. 39) (Jersey) Law 201- (P.113/2011): Amendment (P.113/2011 Amd.).......................................................................34

1. Deputy T.M.Pitman:...................................................................35
2. Senator P.F.C. Ozouf :..................................................................36
3. Deputy M. Tadier :......................................................................37
4. Senator F.E. Cohen:....................................................................39
5. Deputy P.V.F. Le Claire: ...............................................................39

6. Senator S.C. Ferguson:.................................................................41
7. The Deputy of St. Mary:................................................................41
8. Senator F. du H. Le Gresley:............................................................42
9. Deputy G.P. Southern :..................................................................42
10. Deputy A.E. Jeune : ..................................................................44
11. Connétable J.M. Refault of St. Peter:................................................44
12. Deputy T.M.Pitman:................................................................44

4. Draft Income Tax (Amendment No. 39) (Jersey) Law 201- (P.113/2011) - resumption ...........................................................................................47

5. Senator P.F.C. Ozouf :..................................................................49

1. Deputy M. Tadier :......................................................................49
2. Senator P.F.C. Ozouf :..................................................................49

LUNCHEON ADJOURNMENT PROPOSED..................................................50

LUNCHEON ADJOURNMENT................................................................50

3. Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- (P.114/2011)........................................................................50

1. Senator P.F.C. Ozouf :..................................................................51
2. Senator P.F.C. Ozouf :..................................................................52

3. Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- (P.114/2011): amendment (P.114/2011 Amd.) - amendment to Regulation 2 ....52

1. Deputy T.M.Pitman:...................................................................52
2. Senator P.F.C. Ozouf :..................................................................56
3. Deputy M. Tadier :......................................................................57
4. Deputy G.P. Southern :..................................................................58
5. Deputy E.J. Noel: ......................................................................59
6. The Deputy of St. Mary:................................................................60
7. Senator A.J.H. Maclean:................................................................61
8. Deputy T.M.Pitman:...................................................................61

4. Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- (P.114/2011) - resumption..........................................................64
   5. Senator P.F.C. Ozouf :..................................................................65

6. Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- (P.114/2011): amendment (P/114/2011 Amd.) - amendment to Regulation 3....65

1. Deputy T.M.Pitman:...................................................................65
2. Senator P.F.C. Ozouf :..................................................................66
3. Deputy G.P. Southern :..................................................................66
4. Deputy T.M.Pitman:...................................................................66

7. Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- (P.114/2011) - resumption..........................................................68

1. Senator F. du H. Le Gresley:............................................................68
2. Deputy G.P. Southern :..................................................................68
3. Senator T.J. Le Main: ..................................................................68
4. Deputy M. Tadier :......................................................................68
5. Deputy T.M.Pitman:...................................................................69
6. Deputy S.Pitman:......................................................................70

7. The Deputy of St. Mary:................................................................70
8. Senator P.F.C. Ozouf :..................................................................71

8. Senator P.F.C. Ozouf :..................................................................73

4. Discrimination Law and Delay on Pension Reform (P.118/2011) ......................74

1. Deputy G.P. Southern :..................................................................75

2. Discrimination Law and Delay on Pension Reform (P.118/2011): amendment (P.118/2011 Amd.).......................................................................75

4.2.1 Senator P.F.C. Ozouf :..................................................................76

3. Discrimination Law and Delay on Pension Reform (P.118/2011) - as amended.......77

1. The Deputy of St. Martin:..............................................................77
2. Deputy T.M.Pitman:...................................................................77
3. Deputy M.R.Higgins:..................................................................77
4. Senator S.C. Ferguson:.................................................................78
5. Senator P.F.C. Ozouf :..................................................................78
6. Deputy A.K.F. Green:..................................................................78
7. Deputy M. Tadier :......................................................................78
8. Deputy R.C. Duhamel: .................................................................79
9. The Deputy of St. John:................................................................79
10. Senator B.I. Le Marquand:..........................................................79
11. Deputy G.P. Southern : ..............................................................79

ARRANGEMENT OF PUBLIC BUSINESS FOR FUTURE MEETINGS ....................81

5. Connétable J. Gallichan of St. Mary (Chairman, Privileges and Procedures Committee): .........................................................................................81

ADJOURNMENT................................................................................83

The Roll was called and the Dean led the Assembly in Prayer

The Deputy Bailiff :

Before we return to the agenda I was given notice of the wish of Deputy Tadier to make a personal statement, which I agreed last night, and Deputy Tadier , perhaps if you would like to make that statement.

Deputy M. Tadier of St. Brelade :

I would love to but there is one technicality and that is that neither I nor the other Members have a copy of the statement. When that is circulated I will be happy to make it, thanks.

The Deputy Bailiff :

I would rather deal with it now; it is just about to be circulated. Senator Ferguson, is there anything that you wish to raise while it is being circulated? You have your light on.

Senator S.C. Ferguson: Oh, no.

Connétable J.L.S. Gallichan of Trinity :

Sir, it is just to inform the House; I will, like the Deputy of St. John, be attending the last day at Trinity School at 1.15 p.m. I will come back this afternoon but hopefully I will not be late.

Deputy M. Tadier :

Sir, shall I start and then I think most Members have ..?

The Deputy Bailiff :

Members have received the statement; please, would you make it now.

PERSONAL STATEMENT

1. Statement by Deputy M. Tadier re. resignation from Scrutiny Panel

1.1 Deputy M. Tadier :

Can I just reiterate this is a personal statement. It is not the panel's statement; I think that is understood by Members. I would like to take this opportunity to explain to Members the reasons behind my decision to resign from the Education and Home Affairs Scrutiny Panel. I made the Assembly aware of my intention to resign following the debate and vote on P.84 - Prison Board of Visitors: Composition. It was not the loss of the vote per se which caused the resignation but it was the combination of 2 years of personal frustration; frustration which was shared by the panel as to the perceived stonewalling and lack of co-operation from the Minister for Home Affairs throughout the period following the publishing of the Board of Visitors' Report, with the way he dealt with the main recommendation of the report. It was quite clear from the outset that the Minister's personal position was that he did not share the sub-panel's views on changes to the composition of the board. The Minister then went on to suggest that the sub-panel's suggestion for a split board may itself not be human rights compliant because of the presence of Jurats on it. The position was met with incredulity for 2 reasons: firstly because the Minister appeared to misunderstand that this was not a split board but a lay board which could include a limited number of Jurats. Secondly, if his objections were correct they should have also indicated to him that the status quo was even more untenable. Ahead of the debate, scheduled for 12th July and taking place on 13th July, I was pleased to read the Minister's comments issued on 11th July, supportive of the proposition in which he said: "I am able to support this proposition, subject to certain additional considerations which are set out in these comments." He went on to say that he accepted that the present arrangement cannot continue much longer in the light of the human rights-based legal advice. My question is;

what happened between the mandate and the day of the debate that led the Minister to tell the chairman that he was now unlikely to be able to support this proposition? Despite the Minister's report of concerns there was no attempt on behalf of the Minister or his department to contact the panel to discuss these concerns, rather what we saw was legal advice being sought on the day and during the debate which appeared completely opposite to previous advice that the Minister had received. Ironically, the advice received made it even more clear that a mixed board was unlikely to result in a successful legal challenge. This should have permitted the Minister to drop his objections to a mixed board but what actually happened was that he reverted to supporting the status quo which the Solicitor General, on the day, said it was also unlikely to attract a successful challenge. In all this the Minister ignored the advice of the independent external legal advice sought by the panel, which was contrary to the latest variation of advice from the Solicitor General. While I acknowledge that the Minister is entitled to his view, the procedure, timing and manner, with which he dealt with the Scrutiny Panel left much to be desired. It left me and the remainder of the panel feeling that our work, which was generally seen as a successful and balanced review by many commentators, had been treated with contempt. The second major reason for my resignation and the impending resignation of the rest of the panel is the perceived interference from the Minister in objecting to the current BDO Alto review, which is being chaired by Deputy Trevor Pitman and included Deputies Le Hérissier, Wimberley and myself. By objecting to the perceived impartiality of Deputy Trevor Pitman I believe that the Minister has fundamentally misunderstood the nature of Scrutiny, whose members are fully capable of leaving aside preconceptions and looking at evidence in an objective fashion when they commit to performing scrutiny. It is perhaps ironic that the Minister talks of perceptions of conflict being important but did not use this argument in the case of the Board of Visitors. These 2 reasons should also be put in the context of a more general undercurrent of malaise and low morale, which has been prevalent among many Scrutiny members for quite some time. This feeling of futility is only exacerbated when relatively straightforward and well-evidenced recommendations are brought forward but not understood or even read by many Members. I still remain a supporter of the concept of Scrutiny but, as it currently stands, its effectiveness has been emasculated by a combination of lack of goodwill on the part of some Ministers, a lack of detailed and timely information from departments in relation to Scrutiny and a general perception that Scrutiny is less important than the Executive function. I would like to thank the panel members, past and present, for being able to work with them; it was a pleasure in all cases and I would also like to acknowledge the hard work and dedication of the Scrutiny Officers who, I imagine, also share our frustrations on occasion. As for me, I am happy to ensure Members and my constituents that I leave Scrutiny much wiser and with renewed determination to continue to fight for positive change in all aspects of Government and Island life by working both independently and with like-minded colleagues. I thank Members for their

attention.

PUBLIC BUSINESS - resumption

2. Draft Income Tax (Amendment No. 39) (Jersey) Law 201- (P.113/2011)

The Deputy Bailiff :

This being a personal statement there are no questions permitted upon it. We now, therefore, return to the agenda and come to P.113 - Draft Income Tax (Amendment No. 39) (Jersey) Law - lodged by the Minister for Treasury and Resources and I ask the Greffier to read the citation of the draft.

The Deputy Greffier of the States:

Draft Income Tax (Amendment No. 39) (Jersey) Law. A Law to amend further the Income Tax (Jersey) Law 1961. The States, subject to the sanction of Her Most Excellent Majesty in Council, have adopted the following Law.

[9:15]

Minister, do you wish to propose the principles?

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):

This proposition and P.114, which follows, will change, subject to the Assembly's approval, the way we tax high net worth individuals who will come to Jersey in future. While I will touch on the historical background of the matters concerning 1(1)(k)s I would restate that this legislation deals with future newcomers to Jersey. It will not affect those who are already here; that is an issue which I will return to in the budget later this year. I am bringing this proposition because I undertook to do so, at this stage, in advance of the budget. This proposition has 2 objectives: firstly, to simplify the regime for new high net worth individuals and secondly, to remove the barriers that prevent Jersey from benefiting from the 1(1)(k) regime to the full. Currently Jersey attracts 5 new wealthy immigrants per year. We would like to increase that to around 15. We would like to encourage those people to establish their businesses here and bring wealth and activity to the Island. At the moment we have around 140 1(1)(k)s in the Island; that is one- fifteenth of 1 per cent of the Island's population. They contribute £13.5 million - and this has been repeated many times in this Assembly - in direct tax and indeed, on top of that, tens of millions of pounds in indirect economic benefits. A very small number of people contributing a very significant amount of money to the economy and, in turn, in terms of the costs of the economy, much less. This proposition is part of a package of measures that will review the 1(1)(k) arrangements undertaken by the Treasury. I said that I would review the regime with a specific objective of increasing revenues and this is exactly what this proposition seeks to do. What was clear from our review was that the best way to do this was to attract more 1(1)(k)s and encourage them to bring their businesses to the Island. To do this we have to make our regime simpler, more transparent and give a very clear message that Jersey will welcome high net worth individuals and new high net worth individuals to Jersey. What will not work, unfortunately, is to simply increase the tax charged on those already here. That would, in our view, have the opposite effect and over time in fact revenues would probably decrease. This proposition is the second of 3 key stages. The first was to increase the minimum annual tax contribution required from new applicants from £100,000 to £125,000 and, as Members will recall, this was something that was signalled in the budget last year and is now in place with the Housing Department, who approve 1(1)(k)s. The second stage is this proposition today, which will make our regime more attractive to high net worth individuals by making it simpler and, more importantly, more competitive. This proposition will boost Jersey's economy by removing the barriers that stop 1(1)(k)s investing when they come to the Island and encouraging them to bring their businesses. Under the current tax rules 1(1)(k)s pay 20 per cent on any of their income which has its source in Jersey. Income from outside the Island can be taxed at lower rates at 10 per cent and 1 per cent. Jersey's source income includes bank interest, dividends, distributions from Jersey funds, trusts, companies and profits from Jersey businesses. Our current rules discourage, despite the best of intentions, high net worth individuals from investing in the Jersey economy. Members do not need, I am sure, reminding that the global

economic downturn has led to capital drying-up, certainly for some businesses in this Island. Banks continue to have much tougher requirements in terms of credit. Investment from private individuals is therefore one of the key areas that we can invest and find money to invest into the economy. At a time when many businesses are seeking out investment I believe that we should be encouraging policies that encourage investment in the economy. The second major disadvantage of our current system is that it encourages 1(1)(k)s to hold their assets outside of the Island. This can be as simple as opening a bank account in Guernsey instead of Jersey. We tax Guernsey bank interest more favourably than Jersey interest and in our review we have concluded that this simply cannot be right or sensible for the Jersey economy. Wealthy individuals also, before they arrive, set up companies and trusts to hold their assets. Professional advisers are paid to manage and administer these structures. Investment advisers may be involved, lawyers and accountants and all of the service elements of the financial services industry are involved. All of this activity leads to

increased employment and economic activity but because of the way that the current tax rules work much of this activity takes place outside of Jersey and, I have to say, quite a lot of it in Guernsey. There is a third reason why our current tax rules limit the benefit to the Jersey economy. At the moment successful business people are discouraged from bringing their businesses with them to Jersey. The result is too often that the entrepreneur goes somewhere else or locates his or her business somewhere else. At a time when we are facing real issues in terms of unemployment we believe that we can create new economic activity in Jersey and we can see unemployment numbers coming down from greater activity in these areas, in all sorts of ways, by these businesses locating and being run from Jersey. Some time ago the Housing Committee set a target, probably in Senator Le Main's time and before, of welcoming a target of 15 high net worth individuals a year. I am afraid to say that at no time have we managed to come even close to that figure. In the last few years the number of consents have varied between 10 and just one, and one of the reasons is that Jersey sets very high standards in terms of who we issue 1(1)(k) consents to and that is absolutely right and this is exactly how we intend to continue. However, Jersey only benefits from significant contributions that 1(1)(k)s bring if we can attract them to come here in the first place. Many territories offer incentives for high net worth individuals arriving to their shores, including of course the U.K. (United Kingdom). At the moment we are simply not competing as well as we could and I want to change that. We issued 5 1(1)(k) consents in 2010 or should I say the Minister for Housing issued 5 1(1)(k) consents in 2010. A wealthy individual can go to Guernsey and pay a maximum tax contribution of £100,000 or in the Isle of Man pay a maximum contribution of £115,000; there is no minimum requirement. In some parts of Switzerland individuals can negotiate arrangements as low, in some cantons, as £35,000. By contrast, we require wealthy immigrants to pay a minimum of £125,000 and significantly more for those individuals fortunate enough or wealthy enough to have incomes over £1 million. If we are serious about attracting more high net worth individuals to our Island and benefit from the substantial

economic benefit that they bring we have to make our regime for new arrivals more competitive. This proposition and the one that follows does exactly that; removing complexities surrounding the 1(1)(k) regime and introducing a low effective rate of tax after a very high level of income. We could of course simply introduce a cap, and we have given consideration to doing that, but I would say, in concluding, that that is not the right approach. We have concluded that Jersey is recognised as a premier jurisdiction and although we must remain competitive on issues we, I think, can charge a little more than our competitors. This also, I believe, is in the best overall interests of our Island community. I want to make it absolutely clear to Members that 1(1)(k)s will be continued to be treated in exactly the same way as other residents when it comes to income from property income in Jersey, and I know that a number of Members have raised concerns about this over a number of the questions that we have had in relation to 1(1)(k)s. I want to be clear that while we are making some changes to the 1(1)(k) rules the legislation before Members will ensure that 1(1)(k)s will be taxed at 20 per cent on their first £625,000 of their income and 1 per cent on any income above that. However, any income that comes from Jersey property investment will be taxed separately. New 1(1)(k)s will pay 20 per cent on all of their income from Jersey property; that does not mean that there is a competitive disadvantage from Jersey residents compared to (k)s. Dividends from companies which receive this income, if it is property income, will also pay 20 per cent and income from Jersey property will not count towards the £625,000 income. I mentioned that there were 3 parts to the package of measures intended to increase the benefit of the 1(1)(k) regime. The first was increasing the minimum contribution to £115,000. The second is this proposition before Members today. The third piece of work, which also we have concluded from the review that we have done, is that we need to market Jersey better. We need to send out a clear message that Jersey welcomes 1(1)(k)s, welcomes high net worth individuals to our Island, that we do have a tough regime but we are going to welcome individuals and we are going to attempt to meet that target of 15 new residents per year. Members have an opportunity of sending a very clear message that Jersey welcomes high net worth individuals to the Island and we can do so by approving both of the

propositions today. I urge Members to support the preamble to the Bill.

Are the principles seconded? [Seconded]

The Deputy Bailiff :

The principles, having been proposed and seconded, it is open to debate. Does any Member wish to speak? Deputy Duhamel.

1. Deputy R.C. Duhamel of St. Saviour :

Just one small point; persons qualifying under the 1(1)(k) regulation; what exactly happens once these persons have been here for 10 or 11 years and gain their qualifications in their own right? Is the tax that is now being raised only for the 10 or 11-year period and then, thereafter, they revert to being a normal person?

2. Deputy S. Power of St. Brelade :

I listened to the Minister for Treasury and Resources' comments with great interest on this proposition and I was particularly interested to hear the Senator say that high net worth individuals would pay tax on their property investments in Jersey. Could the Minister for Treasury and Resources explain how a 1(1)(k) resident, who may have invested in residential property or commercial property, whether it would be taxed both if the property was held in a commercial limited liability company and whether it was held in their own name?

3. Deputy T.M. Pitman of St. Helier :

I will obviously save most of my comments for the amendment but I would have a couple of questions for the Minister. Firstly, how would he advise us that Government - if this is passed or my own proposition - verify the overseas income, the worldwide income, from 1(1)(k)s? Secondly, I would like him to just explain about his comments about ensuring the high quality of people because of course we have one former mercenary here; that is a fact.

4. Senator S.C. Ferguson:

I am concerned that such an important piece of legislation is being rushed through at the very end of the last session before the summer recess. We are seeing a considerable amount of such legislation and actions being brought, at times, which could be, in the well worn phrase, a good time to bury bad news. The legislation is important but is buried at the end of the session. This indecent haste resembles the current agenda to dismember Property Holdings with the concurrent risk of the transfer of property to the States of Jersey Development Company without obtaining the correct market value for the States. Do not forget, the current structures were set up by States decisions, which appear to be being ignored. While this is a welcome revision to the current law it should not be timed as it has been. The Minister for Treasury and Resources also talked of the target of 15 1(1)(k)s a year; what was the basis of this forecast? Where is the evidence for that forecast or was it just a figure plucked from the air?

5. Deputy G.P. Southern of St. Helier :

I must say that is very instant; there cannot be many speakers around. It is nice to hear the Minister for Treasury and Resources being optimistic again. It is always nice when he talks-up the economy and says: "This is what we are doing and it is going to increase our income." But I ask Members to look at these principles and say: "Will this actually attract any more 1(1)(k)s to this Island than we currently do?" I believe the answer is no; 1(1)(k)s are very wealthy individuals and they have lots of assets and lots of income streams around the world. Do they declare those income streams in their entirety to any particular government? They usually often do not.

[9:30]

One of the things that we are involved in is providing mechanisms by which money can be held in trusts, by groups of individuals, whatever, where the beneficial owner is not known. That is common practise worldwide. Is it likely that 1(1)(k)s, or shall I say ultra-high net worth individuals, are going to come Jersey and say: "Yes, we will tell you exactly what we have all the way round the world and what income streams we have from that"? It is highly unlikely. It will not happen, it is not an attractive prospect, for a high net worth, certainly an ultra-high net worth individual to do so. Having made a declaration: "This is what I have got - all in the world - and these are my income streams", in what way can Jersey check that; verify that that is an accurate picture of this person's wealth before it charges 1 per cent on it? It cannot. There is no way that we can seek money that is held in a Virgin Islands' Trust with a body as the nominee shareholder in that particular organisation and chase the chain as it disguises where people's wealth is held. We cannot do that. So, can we charge 1 per cent on worldwide income? Can we heck. No we cannot. To suggest that

The Deputy Bailiff :

I ask you just to withdraw the word "heck" which is not a parliamentary expression.

Deputy G.P. Southern :

I wondered, Sir. I am certainly willing to withdraw it. We cannot.

The Deputy Bailiff :

Were you just testing to see if I was listening? [Laughter]

Deputy G.P. Southern :

No, Sir. At this time in the morning after 4 days in this Chamber I am not testing anybody. It is amazing I can stand and talk at the same time. Mind you, that is amazing anyway. Where was I? [Laughter] Thirty-five to 10; we cannot verify whether that is an accurate figure before we charge 1 per cent on it. Then just examine so it is an unattractive package. We are not likely to increase the numbers of 1(1)(k)s coming here. We are not likely to see this boom in taxation from it. It will not be a boom in taxation because it is 1 per cent and just think about that in today's age where we are taxing more and more increasingly personal taxation; 84 per cent of our total tax coming from personal taxation nowadays, and here we are taxing our own residents like we have never taxed them before while letting businesses off the hook with zero rate and 10 per cent rate so that their tax revenue generated has gone down and down and down over the years to a quarter of what it once was. That is what we are doing and we are saying to our residents, our voters; that these people can do business on this island like you and only be taxed at 1 per cent. What sort of a message is that to give to our residents? I would suggest that is the equivalent of a slap in the face. You pay 20 per cent but these people will pay 1 per cent and they might be doing exactly the same activity as you, the same business as you but they will get away with 1 per cent. What a wonderful world that is. Well, the Minister for Treasury and Resources is a very talented and clever man. If he can sell that to the voters good luck to him but I am not prepared to try and sell it to my voters. I will be urging them to vote against this pie-eyed plan.

6. Deputy P.V.F. Le Claire of St. Helier :

I would share the concern about the amount of legislation - and I expressed that view yesterday and the day before - that is coming before the Assembly at this time. However, I am also going to support the Minister for Treasury and Resources this morning, because I believe - it is not a case of my opinion, it is a fact - that we have got unprecedented levels of unemployment in the Island. The economy is fragile. The global position has just been salvaged with a deal yesterday in terms of the eurozone and we have a ridiculous situation in Jersey where anybody from within the entire European Union can walk in here tomorrow and settle, arguably bringing zero benefit whatsoever and taking up one or 2 jobs as well as having demands upon the services of the Island with arguably no benefit and in some cases detrimental effect. There is no evaluation for literally millions upon

millions of people who can access this Island. Here we have a very small percentage of people who are going to be scrutinised in the main to a very high level. One of the interesting things about Jersey; I think most people that ever came here will agree with me that once you have been to Jersey and you have stuck around for a couple of months, it is very difficult to want to leave it. It grows on you. Jersey is a place that most people who have settled here recognise as a wonderful place to live. I am not dismissing the concerns of some similarly-minded politicians who have concerns about the inequity in relation to tax distribution and levying of tax but I would say quite clearly that the lack of tax that we have been able to take is because of a global position that has been forced upon us by driving down to the bottom. These situations and the poor regulation of banks have meant that the economies of the world have suffered. We have been under the knife, I would say, and not the microscope in relation to the Code of Conduct Group for the O.E. C.D . (Organisation for Economic Co-operation and Development) who have had to do away with 4 of our income streams which raised significant income, and it is because we have had to do away with those initiatives that we have subsequently suffered from a lack of income. That lack of income has meant we have had to put up taxes. It has been argued that we are not taxed across the board in many different ways. We have yesterday approved the long-term care strategy in relation to social security so we recognise that there are things that we need to be doing. There is obviously some inequity as well, clear inequity in relation to how long people have to wait to access accommodation in Jersey. Some people have to wait 10 years; these people will be able to come in and have access to very nice houses and a very nice way of life. But the up-side to that; I have never been one to look over my fence and have green eyes for the neighbour. I do not think that does anybody any good. The difference has always been in Jersey that you do not look with envy at the man in the street with the Rolls-Royce; you think to yourself, perhaps one day I will be able to achieve the same. The opportunities that these people will be able to bring are going to filter into the economy. At a time when there are high levels of unemployment I think it is prudent for us to support the Minister for Treasury and Resources. I also think it is prudent for us and for the next Assembly to recognise that when legislation is brought there needs to be a mechanism to ensure that Scrutiny can have some interaction. There is no possibility for this at this stage and I think what we need to do is ask the Minister for Treasury and Resources if he would agree, in us giving him support today, to report back every year as to the position of 1(1)(k)s - what they have brought in terms of income, how many we have achieved, what are the real benefits - so that Members can have a clear and concise understanding of exactly what the benefits are, because I do think they will bring some benefits but I think it is a body of work that we need to keep an eye on. I think we need to demonstrate that it is not only fair but it is providing jobs for ordinary people and right now jobs for ordinary people are what I am about. I am about trying to get jobs for ordinary people because

they need these jobs and we do not need to lose any more jobs.

7. Senator F. du H. Le Gresley:

I have to be honest; I have lived in Jersey all my life - like a lot of people in this House - but I have always been uncomfortable with the 1(1)(k) regime. It simply stems from the fact that why should certain people in Jersey have a better tax arrangement than the rest of the population. The Minister, in his speech and also in his report, makes comparison between various other territories - this is on page 5 of his report. He lists Jersey, Guernsey, Isle of Man, Switzerland and Monaco. What is different about Jersey - and Members may not be aware of this and this is, I think, very important - is that we have this exclusive arrangement, which is going to change probably today for high net worth individuals who want to come and live here but in Guernsey the caps that apply are about all residents, they do not distinguish between the people who want to come and live there because they are extremely wealthy. Anybody in Guernsey who is wealthy is subject to these caps. The Minister may be shaking his head, I do not know if that is true or not but that is my understanding that these caps in Guernsey apply to all residents and not just to the wealthy immigrant population. This has come from Wendy Martin, Director of Tax Policy so I assume it is correct and it is also what is on the Guernsey website. So that is Guernsey; so it is fair and equitable in Guernsey. The

Isle of Man, their cap of £115,000 - I am reading again from something I printed from their website, the Treasury Income Tax Division - they changed their cap some years ago, I am not sure of the exact date but they do say: "This new form of relief is statutory, simple to understand and is available both to current residents and new residents alike. The fundamentals of our tax system are not being changed." So, basically Isle of Man and Guernsey; the caps apply to all residents. I also researched Gibraltar. Gibraltar has very low caps in comparison to Jersey, Guernsey and the Isle of Man, however, they - like Jersey is trying to and has done for many years - treat high net worth residents in a different way. They call them Category 2 Gibraltar Tax Residents but what is so interesting, and I think Members may be interested to hear about this, is that they have very strict rules about Category 2 individuals. I printed this off probably about 2 weeks ago from the Gibraltar websites where they say: "The Category 2 individual must be of substantial and sound financial standing and have a minimum net worth of £2 million. The Category 2 resident must either own or rent approved residential accommodation in Gibraltar. The Category 2 individual is not allowed to engage in a trade, business or employment in Gibraltar. Category 2 status is granted on an indefinite basis but the Category 2 residency certificate needs to be sent to the Gibraltar Finance Centre for endorsement every 3 years. The Category 2 individual must have private medical cover in Gibraltar." What this is implying to me is that in Gibraltar they may welcome high net worth individuals but they keep very tight control on their activities, where they live, and they are not allowed to engage in a trade, business or employment. I can only give you the facts that I have gleaned and I leave it to Members to decide whether the 1(1)(k) system is fair or equitable.

8. Deputy J. B. Fox of St. Helier :

I shall be supporting this proposition and I will tell you the reason why in simple terms. Indirectly and directly I have been involved with 1(1)(k) residents for many a year and I am not talking about the direct amount of money that they supply by way of tax; I am talking about the support that they give to this Island. Huge support; a lot of it is anonymous although there are some high profile ones who we have seen over the years. Without them this Island would not be the same place as it has been. This Island is very much involved in charitable support and 1(1)(k)s that I have known over the years have supported charities and the work involving the Island communities to such an extent that many of the charities would not have been successful without their support. Therefore, I think that we in this Island are a very multi-racial society now and that must include the walks of life that people come from and obviously go to as well and we should welcome the good nature of many of these people and the way that they support, which they do not have to.

[9:45]

9. Deputy C.F. Labey of Grouville :

I must confess I was hoping to speak after Deputy Southern , because I really did not understand his speech; it is a shame he is not in the Chamber now He spoke about 1(1)(k) residents paying 1 per cent tax and I thought the Minister for Treasury and Resources made it perfectly clear in his speech and in the proposition that 1(1)(k)s will be paying 20 per cent on their Jersey income, the same as Jersey residents, so I am a little confused at that. I must confess my experience of 1(1)(k)s living in my Parish has been a very positive one. I feel they have always contributed [Approbation] very well, not just where they have been required to contribute in the tax take but also in the community, some more conspicuous than others. But they have, nonetheless, I feel certainly played their part in the community. There is one thing that I would like the Minister for Treasury and Resources to confirm in his summing-up and that is I am worried about the figure of 15 1(1)(k) residents a year; that is what we are trying to attract. It does seem to be an awful lot and with this I am worried about the amount of properties. Over a decade that is 150 properties. These are substantial properties usually with substantial amounts of land that go with them and I would like him to confirm if there has been a job of work done to indicate what this may do to the local property market and how it may distort things.

10. Senator F.E. Cohen:

There undoubtedly are moral issues around making special immigration arrangements for wealthy immigrants in the same way as there are moral arguments around the special exemptions that are made in relation to tax for the immigration of artists and creative individuals in Ireland. However, we have the benefit of not having to make the moral balance because it was made a long time ago and we have the wonderful benefit of knowing the amazing contribution that wealthy immigrants have made to this Island. Individuals have come to Jersey now over many decades and have learned to love the Island and love it with a passion. In fact, it is often said that immigrants can learn to love the Island more than some indigenous people. Many have established huge charitable trusts and many have left very significant fortunes for the benefit of the Island and the Island's charities. They bring with them not just wealth but entrepreneurship and gratitude for living in a beautiful Island where they are able to live safely, without interference and able to educate their children under a system that is much envied around the world. They have, as Members will know, the highest level of scrutiny on entry and individuals wishing to come to the Island, in most cases, are subjected to exceptional scrutiny, where they are required to identify their source of wealth, their source of income, their business history and are subject to rigorous and sometimes onerous personal examination. We are, in this context, in a highly competitive environment. Once we have made the decision as we did many years ago to embrace the benefits that wealthy immigrants can deliver to our community, we are competing against the Cayman Islands, Switzerland, the British Virgin Islands and of course most notably our near neighbour, Guernsey. To some extent some of our competitors have a much more attractive environment and much simpler environment and our great asset is that we are a better place to come and live and wealthy immigrants are prepared to pay a premium to come to Jersey over many other places. That is often down to the issues I have outlined including education, natural beauty and of course our excellent communications with the mainland and Europe. I fully support the Minister for Treasury and Resources and I am aware of some of the advice he has been given and I fully support the excellent work of the Comptroller of

Income Tax and the Director of International Taxes in this area. I must say that I have encouraged the Minister for Treasury and Resources to go further and to consider the concept of a cap and a cap at a very high level, because there are cases when an individual's affairs are so complex that the cost and problems of an annual full tax return make it prohibitive for them to come to Jersey.  I have encouraged the Minister for Treasury and Resources to accept the principle of a very high cap as an alternative with a short form declaration as is the case in Guernsey. That would put us firmly in competition with Guernsey, albeit that our offering would be significantly more expensive but I do not think that is a problem. There are other issues that are evident in Jersey where wealthy immigrants have had a significant impact in the past and quite honestly we could do with more in the present. That is we have significant problems in the housing market and the effect of new people coming into the Island as 1(1)(k)s or as a new entrepreneurial class as I am going on to in a moment, can have a dramatic effect in encouraging the housing market to get moving again. For someone who buys an expensive house, buys it from someone who buys a less expensive house who then has to acquire another house, usually at a lower price, and thus it goes down the train. A single wealthy immigrant can have a significant impact on getting house sales moving again. One of the issues we are suffering from in the Island at the moment is lack of volume in the housing market as well as undoubted price falls pretty much across the board. I do not think that we should underestimate the affects that 1(1)(k)s have had in the housing market in terms of creating volume in past years and the fact that the tailing-off of 1(1)(k) immigrants in the Island over recent years has in itself contributed to some of the problems we face in the housing market. There is of course the additional impact that 1(1)(k)s directly and indirectly employ Islanders, often in new businesses that they or their children encourage and sponsor. They also employ tradesmen and people across the board in the Island. The Minister for Treasury and Resources I heard refer to the tens of

millions of pounds of additional benefit that wealthy immigrants provide annually in the Island. I would say it was many, many, many, tens of millions of pounds in indirect benefits. I would also encourage the Minister for Treasury and Resources to consider in the longer term a new entrepreneurial immigrant. There are opportunities to provide residential rights to people outside the Island who have shown themselves to be entrepreneurial successes; people who I term "midstreamers", who have built up businesses, who have made some fortune but perhaps not as much as a 1(1)(k), who is often a retiree, who wants to be active, who wants to base themselves in a place where there are not just tax benefits but benefits in terms of security, natural beauty, a high- quality education system and good communications to the U.K. and Europe. I can assure Members that there are huge opportunities in this area. It is a vast, untapped resource that the Island could take great opportunity from creating the right environment to encourage midstreamers. As I have said, these are not people who are enormously wealthy but these are people who are entrepreneurial successes, wish to establish new businesses or re-base their businesses, can employ our nearly 1,500 unemployed in the Island and create great opportunity for Islanders both in terms of tuning education towards the services that are required by these new entrepreneurs and generally benefiting the Island. I would therefore sincerely encourage the Minister for Treasury and Resources to look at this new class of individual at some time in the future. So, with that, the Minister for Treasury and Resources has my full support. I will only be supporting this proposition and I urge all other Members to do the same.

Deputy G.P. Southern :

Through the Chair may I seek a point of clarification from the Minister for Treasury and Resources? Having heard the speech of the Deputy of Grouville , I believe Members may be confused about what is being proposed.

The Deputy Bailiff :

Can you clarify that very quickly?

Deputy G.P. Southern :

The question is whether these new 1(1)(k)s will pay 1 per cent tax on most of their income or 20 per cent tax.

11. Senator T.J. Le Main:

I would like to say that perhaps I have got more experience in this area than any other Member in this Assembly, having worked closely with the Comptroller of Income Tax over the last 11 years as Minister for Housing. I have interviewed, with my Assistant Ministers, very, very many 1(1)(k)s' incoming inquiries and the evidence over the years is absolutely overwhelming in regards to the benefits to Jersey. Not only tax, but also inward investment, employment, very often assisting financially local businesses who are having difficulty in perhaps borrowing from banks; the entrepreneurs - these 1(1)(k)s - take chances and they are prepared to invest in local businesses and in the Island where maybe a bank is reluctant to do so. They also, I am well aware and I have no intention of disclosing names, I cannot disclose names, but I know of many who have donated huge sums to churches, to charities and are doing so through trusts and otherwise on a yearly basis. Everywhere in the world governments encourage and want to welcome wealthy migrant investors to their shores. Look at the U.K.; for years and years and years they have quietly, without much publicity been welcoming with huge incentives wealthy foreign people to come and live in the U.K. Look at the influx over the years of the Arabs, the Russians and other people from all over the world. They do not give them nationality but they give them residency. The investments that accrue through those wealthy individual businesses are indeterminable. I know many cases, as I say, that really are absolutely fantastic in their charities, their employment in Jersey. I have, over the years, interviewed, as I say, many and I have turned down some. There have been quite a few who have not met the criteria that we need as an Island that needs to maintain its reputation.

The 1(1)(k)s that the Minister for Housing and the officers, when they determined applicants they have to be high quality individuals and full checks are made on everyone. Many years ago when I was a new Member of this House, when I was in my 30s - that was a long time ago - I was perhaps a little bit apprehensive of 1(1)(k)s as I really did not understand the benefits that could accrue from people who brought their wealth and entrepreneurship to this Island. I would say that whatever we do, we will never satisfy the half a dozen in this Assembly that, for one reason or another, just do not want, do not like or are jealous of the wealth creators who we are hoping that we will support today. The real facts are that I very much will be supporting the Minister for Treasury and Resources because, as I say, through experience I well know the huge benefits, not only financially but very much socially and charitably, that they bring to this Island. As I say, I would like to say a public thank you to all those who are involved in the huge amount of monies and issues that they do for the Parishes in Parish involvement and in fêtes and organisations and charities and I say welcome them all and I am very much in support and will do all I can while I am in this House to make sure that we make them most welcome and long may they make this Island a prosperous, safe and lovely place to live.

12. Deputy M. Tadier :

Senator Cohen made a remarkable statement, in my opinion, saying essentially that there certainly are moral issues surrounding 1(1)(k)s being let into Jersey and the whole tax regime that has been put in place for their benefit and perhaps for the benefit of the Island as the argument is going, which I will try to refute to some extent. But then he makes a comment saying that we do not have to make the moral balance, because we are in a fortunate position in that that has already been made for us a long time ago, and that is the end of the argument. There never really has, certainly in my living memory, been a debate about the morality, about 1(1)(k)s, about taxation in general, about progressive/regressive proportional taxation in the Island and that is part of the problem. We have inherited a system or a system has grown up which does not necessarily have a legitimate mandate or backing of the people of Jersey or of this House, it is simply because it is there. One can imagine similar arguments being made in the Caribbean, saying that we do have slavery, yes, there are moral issues to do with slavery clearly, but we do not have to worry about that because that decision has been made for us and the French are doing it, the English are doing it, they are doing it in South Africa, so that is all fine and it provides jobs and it provides housing, Deputy Le Claire, so that is okay, is it not? How many in this Assembly

Deputy P.V.F. Le Claire:

Can I ask, is he saying that I am suggesting that slavery is acceptable?

Deputy M. Tadier :

I am not giving way but I will accept a point of order. If there is a point of order I am happy to give way to the Deputy .

The Deputy Bailiff :

No, it is not a point of order.

Deputy M. Tadier :

Are there any Christians in this Assembly, because I came in this morning listening to people mouthing the Lord's Prayer? I certainly know there are Christians in the Assembly in the form of Deputy Southern , Deputy Trevor Pitman, Deputy Shona Pitman and the Deputy of St. Mary and myself, insofar as we support Christian values. Does anybody remember the parable - I think it was a parable - of the widow's mite, where an elderly lady goes to the temple and gives 2 copper coins, puts them into the collection pot and then a Pharisee comes up, very grandiose, very much in the public eye, a pillar of society, gets out a big wad of whatever the currency was, dinars or in those

days - perhaps Senator Cohen can help refresh my memory, certainly were not euros in those days - puts a big wad in there, then walks off. Then I think Jesus asked: "Who gave the most out of those?" Of course it was the Pharisee gave the most money. He said: "No, it was the woman." The reason I bring this point out is of course we know that 1(1)(k)s in society can contribute a lot. Certainly, most Jersey people could also contribute lots if they did not have to pay 20 per cent tax; they would have a lot more disposable income to play with. Some, I am sure, go to Parish fêtes; they support the Parish, they go to Parish Hall Assemblies, some do not know what is going on in the Island at all as I found out when I was knocking on doors 3 years ago. They said: "What? What is an election? What is a Deputy ? I am flying off to America in the morning so I am happy for you to leave me a leaflet and I will read it in a couple of months when I come back." These are all very complicated issues. We shy away from the moral issues surrounding that. There are a lot of people who contribute to Jersey. I go around the charity shops and it is not 1(1)(k)s who are working behind the counter in Oxfam, in Headway, at CRY, at Barnardos; it is usually retired ladies, housewives, young gentlemen who cannot get work in the Island; they cannot get work despite the prevalence of 1(1)(k)s in the Island. They are giving up their time but also having to pay up to 20 per cent tax on everything they earn and they have to declare it because they do not have ways to get around it. It does not tell the full story when we say it seems to imply that only 1(1)(k)s are ones contributing to the Island. There is also this argument having been made that for some reason they create jobs over here. Now, they may or not create jobs. There is absolutely nothing in this law which requires a 1(1)(k) to come to the Island and provide jobs for people in the Island. They could equally come over here and not provide jobs. They could come over here, keep their money here, just live in their house for part of the year and not provide any jobs. It is also entirely possible for them to create jobs at or around the minimum wage which do not provide any benefit to the Island, to locals, that is why I have been asking for statistics from the Minister for Economic Development, because anecdotal evidence tells me that some companies in the fulfilment industry seem to employ a majority of unqualified labour, and that is not to disparage those workers themselves but it is to point out that catalysts in our current system seek to maximise their profits by paying the minimum amount of labour out by contributing the least amount to our society and by hoarding the most wealth for themselves. It is systems like we perpetuate in Jersey which create or maintain the distance between the poor and the rich, but not simply that; they increase the distance and the gap between the least well-off and the most well-off, not simply in the Island but throughout the whole of the world, which is responsible for causing problems such as shortages in affordable housing, such as shortages in land use because that land is being used for them when it could be used for other purposes. There is also the moral issue of how they jump the queue when they get here. Now, I would like to know how Christians, which I know Deputy Le Claire is, for example, how he would square that up? How do we say, in the Strategic Plan which we voted for by a majority which includes terms like fairness and equality in the Island, not only can you jump the queue and come here when other hard-working people Polish people, who interestingly contribute to society; work in shops, they pay Social Security contributions, they often work for low wages, they live in unqualified housing which does not affect qualified housing in the Island and they pay tax also where necessary at a higher rate than 1(1)(k)s so let us also hear it for the immigrant workers in the Island because they contribute greatly to our Island. How is it that they have to wait here 10 years, pay shocking amounts in rent - often those properties might be owned by very wealthy people who do not even live in the Island anyway so there is an issue with housing. I know that we want to create jobs. I am saying that we do not even know if this works in creating jobs. What we do need to look at in the world and in Jersey is the distribution not simply of income and resources but the distribution of labour because when you have perverse consequences of people with a disproportionate amount of buying power that can come to the

Island and put small traders potentially out of business. We heard the same arguments yesterday. The reason we do not want big shops to be able to open in Jersey is because it puts the small traders out of business. The exact same argument can apply with the purchasing power of 1(1)(k)s in the Island who are given essentially tax breaks to come here. They are given breaks to jump the

housing queue and then set up businesses which do and can prejudice local businessmen and local technicians. So, these are the considerations which need to be put out. I will not be popular for saying them. Of course it is more balanced and of course, as I have said, 1(1)(k)s can and do contribute in many ways in the same way that poor musicians and other people who do charitable work can also contribute. So, I am not going to support this because it is inherently flawed; we have not had the basic debate about the moral  issues. I think Tony Benn put the argument succinctly, although it is not a direct parallel, that simply to use an argument saying everybody else is doing it therefore we must do it which is one of the arguments which is being used he said that if everybody else was pimping-up their daughters for prostitution then that does not mean that I would have to do it. It is a completely flawed argument. We do need to take a moral stance and say Jersey's values are not simply mercenary and they are not financial and that if we spent as much time producing and rushing through laws like this as we did about talking about fairness and discrimination laws in the Island - which we do not have in place even after 6 years of Ministerial government - then I think the public would have a lot more respect for government when they talk about hollow words such as equality and fairness. It is not jealousy, Senator. I do not see how it can be called jealousy because it is to do with fairness and taxation; it is simply not to do with jealousy. I am jealous for those who cannot afford to own their own houses in Jersey. I am jealous for those who cannot afford to necessarily buy fresh bread when they want to in the Island and it is because of the system it is not because of the individuals within the system. Good luck to anybody who wants to work hard but it does not necessarily go hand in hand that hard work makes you a millionaire overnight. In fact, most of the people who are struggling and work 60 or 70 hours a week will never be millionaires and it is because we have people in society who are so wealthy and that that wealth will never be distributed whatever happens, that they cannot get on to this ladder. So, the American dream which was referred to earlier is that if I work hard I can get that Mercedes, I can get that no, you will not get that because the system is set up against you. What we need to do is have more equality between minimum and maximum wages, et cetera and that is what will make for a fair society. It is not laws like this which simply look for short-term solutions which we have heard will not work anyway because there are so many mechanisms in the Island for people to avoid paying taxes. How do we know where people's incomes are coming from? How do we know where their assets are? There are so many mechanisms in place for that not to be the case. I would ask Members to seriously reconsider. I know we want to be seen to be doing the right thing and be supporting Ministers but when they are based and predicated on flawed premises in the first place, I think that we have a moral obligation to kick these into touch and look for tougher but

fairer measures to be introduced in the future.

The Deputy Bailiff :

Deputy , I did not want to interrupt you in the course of your speech - you clearly feel passionately - but you used earlier in your speech the expression that Members were "mouthing" the Lord's Prayer. Could you please explain the sense in which you used that expression because if you were meaning to imply that Members did not intend what they were saying, I think most Members would find that very objectionable. [Approbation]

Deputy M. Tadier :

I am happy to. When I say mouthed, clearly I did not mean that the words were not necessarily coming out of their mouths. What I am saying is it is easy to say words entirely in sincerity but there may also be logical consequences from what you believe that are not immediately apparent in belief systems which can be very complex. So, it is easy to say something but if you think through all the logical consequences of what you believe, they may not necessarily stack-up and there may be inherent contradictions. That is what I was implying in it and I think that is a valid intellectual argument to be putting forward.

13. Deputy A.E. Jeune of St. Brelade :

I listened with interest to what Senator Cohen was saying this morning but it raised a question for me so I would like to ask the Minister for Treasury and Resources in his summing-up whether he could say the entrepreneur category referred to by Senator Cohen, which I believe he has discussed with the Minister for Treasury and Resources, would those persons fall within the number of 150 heads of household per year count.

[10:15]

14. Deputy P.J. Rondel of St. John :

I have heard a lot of negative speeches on 1(1)(k)s, not only today but over the last few months in this Chamber. I sincerely hope that we will soon be getting to the end of bringing in further legislation to do with 1(1)(k)s, because we are sending out the wrong message to people who are residents in the Island. If I could take up a particular issue with Deputy Tadier ; when he spoke he mentioned about the ordinary people working in various charity shops. Please could he tell this Chamber how he can identify a person who may be working in a charity shop as not being a 1(1)(k) or being a housewife, et cetera, because I am aware of a number of our 1(1)(k) residents who do go and help out in charity shops across the Island. [Approbation] We are being so negative in the way we are speaking and trying to get other people to integrate. I have said it before in this House; many 1(1)(k)s are now second or third generation people with their grandchildren in this Island and contributing. Many of them are carrying local names; names that have been here for hundreds and hundreds of years, going back to the beginning. I think it is time we came off the fence of hitting out at a group of people. I do not want to go on because I have said it so many times in this Chamber but we are killing a goose that lays a golden egg. I was speaking to a gentleman walking up the street who works within our States departments who has responsibility in this particular area. It is very difficult. We are competing for these 1(1)(k)s to pay tax with all the other jurisdictions around the world and although we would like to have 15 1(1)(k)s every year, it is not going to happen because all these other jurisdictions are competing for the same people. Do not kill the goose that is laying the golden egg because many of us here - and I know when I was in business I would say 15 per cent of the work that passed through my business at that time was for 1(1)(k)s and it was repeat business, year on year. That was a lot of money and I have been retired 20 years. That money is still circulating within this Island. Do not, please, Members who talk negatively, it is a far bigger picture where these peoples' money is circulating decades and decades after they

have arrived. Please do not kill that goose.

15. Deputy M.R. Higgins of St. Helier :

Earlier we heard Deputy Le Claire talking about he is asking the Minister for Treasury and Resources to bring forward evidence of the contribution of the 1(1)(k)s to the Island in the future. I would have liked to have seen the evidence now. We are being asked to adopt a policy that will bring in more people who are very wealthy people who are going to pay, I think, less tax because I am just not convinced I agree with Deputy Southern on the fact that this Island has a history of helping people with their Tax Planning (to put it in the very friendliest way), of making sure that they get the best return on the money that they have. They know where to put the money and how to avoid, let us say, penal taxes and everything else. The point is that these people, if we say that we are going to tax them on their world income, I do not believe we will ever tax them on their world income; we will never know what it is, we will never be able to verify it one way or the other. So, I would have liked to have seen some evidence of the contribution that the 1(1)(k)s have seen. We have seen a report that initially we were not going to see which was commissioned from the firm who promote high-wealth people and making sure they are getting good benefit and then that is put to us as being told that these are the advantages of having 1(1)(k)s. It was a biased report from an organisation that had no credibility. I do admit though, I will say this, that some of the very wealthy in the Island, the 1(1)(k)s do make a very good contribution to the Island. I know a number of them and I am very grateful for the work that they have done but I am only aware if a

few of them. I also know there are others who various organisations have approached and they have never heard a thing and you do wonder about what some of them do. We have no evidence of their real contribution. We have to take it on faith that all of them are doing charitable things, they are doing good for the Island, they are employing lots of people. I must admit I am not a great believer in the trickle-down theory that because they are wealthy they are going to employ lots of people and they are going to spend lots of money in the economy. These people can jet out of this Island and they can do whatever they want anywhere else. They do not necessarily have to do it. There is no evidence whatsoever. That is the first point: evidence of contribution. If I had evidence then I  might change my stance. At the moment we just take it as a leap of faith. Secondly, we already have in Jersey a 2-tier society and there is a difference between the haves and the have nots. This is not envy or anything else; it is a statement of fact. There are some people who are extremely wealthy and there are some people who are really suffering and we do have a real division in our society. We have people who have houses and we have people who will never have a house. We have children - and I know my children - my daughter is 40 and she has got a property, my son will never, ever be able to buy a property and his house and that is true of many families in this Island. My son, in fact, is leaving the Island. He is going to work abroad. Others have left as well. I know many families are thinking about leaving the Island because of the way it has gone to being a very expensive place in which to live. I happen to believe that by bringing in policies such as this we are exacerbating the problem. We are exacerbating the 2-tier society that we have. I think it was Senator Cohen who mentioned about the wealthy immigrants coming in and the effect they had on the housing market. Yes, they do have an impact on the housing market but not necessarily in the way that he is talking about, because many of them have entered the buy- to-let market. I believe that the new Waterfront development is 90 per cent sold and 50 per cent occupied. Well, what does that tell you? The people who have bought them have bought them as investments not to live in. Why are people not living in them? Because the rents are too high. I have looked at the Dandara website in the past and they extol the returns you can get on your investment. For foreigners to buy properties in the Island and the returns they can get very much because the government are prepared to pay rates too to many of the people they bring in. What I am saying is that if we are encouraging buy-to-let on this basis, what we are doing is taking away properties that are not there for the ordinary Jersey person and pricing them out of the market. You may say: "Rubbish" Senator Le Main but it is your policies and the policies of your colleagues in the Council of Ministers that have made this Island what it is at the moment and made many people not have homes.  [Approbation] We are also told, for example, that we have to adopt this particular policy for competitive reasons. Basically this is another example of a race to the bottom. We are constantly trying to outdo or outbid our competitors and so what we are now doing is we are following what we did on company taxes. Just look at the situation; we now have a situation where 84 per cent of all taxes in the Island are raised from personal individuals. We have no company taxes. We have created a situation where foreign firms who own businesses in the Island are paying nothing towards the upkeep of this Island. We have got to be grateful for the fact that they employ people and those people pay income tax. We also have a situation; because of the rules to do with the O.E. C.D ., you cannot discriminate between foreign owners and local owners and so therefore the deemed distribution provisions were thrown out because we were trying to claw-back from locals taxes that we could not impose on foreigners. So, as a consequence, there are no company taxes except on the finance industry; 10 per cent and utilities 20 per cent. But there is a big hole which has got to be filled by ordinary people in this Island. As I said, we are engaged to the race to the bottom. We are trying to get more wealthy individuals in the Island by offering lower and lower rates of tax to attract them with the net result that we will get even lower tax from them and again ordinary individuals, the Jersey middle-income earners are the ones who are going to be paying the taxes, because rightly, those who are not well-off pay little or no tax but if the rich are not paying their share of it then the tax burden is falling purely on the middle. I do not think it is fair that those people should be doing that. One thing that I do agree with Senator Cohen about and something I believe strongly in is the need to encourage entrepreneurialship. It

seems a bit strange this. It is a bit different on the one hand saying: "I do not want wealthy people in the Island if they are just going to pay lower tax." It is to do with contribution that matters to me. I have no objection to them being here if they really are and I can see demonstrations of where they are contributing to the economy. Senator Cohen said: "Oh, these people come in and they contribute to the economy by buying houses." Let me just mention something about the housing market. One of the problems we have had, we have had high economic growth in this Island. One of the contributors to economic growth is building development housing but it is a false form of economic growth. What we have done is we have built all these flats and houses, many of which are now not occupied. They are unaffordable by ordinary people in the Island. What we are doing at the moment, according to Senator Cohen, is that if these people come in it will prop-up the housing market. The housing market is unsustainable. We have a situation where the prices are extremely high for flats and houses, where people cannot afford to pay for these houses, the banks are assisting on deposits that they cannot possibly achieve and secondly the earnings/price ratio is way out of kilter. In the U.K. I think it is 3 times your income is what you can afford to buy a house. In Jersey I think it is 5 or 6 and even now the banks are not being prepared to do that because they have got their hands burnt elsewhere. So, we have a situation where all we have to do is drive around the Island and look at the "for sale" signs; I have never seen so many in my life. It is my view that the only way the housing market will survive is if we have unfettered population growth because it is not sustainable at the present time. People are hanging in there, prices are starting to fall slowly but surely, and all it takes is an economic crisis and we will get negative equity. I know it sounds scaremongering and everything else. It is a statement of fact. We have an unsustainable housing market and everybody is just hoping that we are not going to have problems when it crashes around our heels. Anyway, what I would say is that I would like to encourage wealthy people to come to the Island to invest and I would rather see a tax regime that assists them with investment. I do not mind rewarding them if they come in here and create new businesses that

will create sustainable rather than false growth in terms of housing and are creating employment. That is the policy we should be having; encourage them to come in, pay them, reward them for that type of activity rather than just simply say: "You are rich. We want you to come in. You can pay less," in the belief that you hope they are going to make a contribution to the economy.

Deputy A.E. Jeune :

May I ask a point of clarity of the last speaker? The speaker referred to a report from a company that had no credibility. Could he identify the evidence he has for this?

Deputy M.R. Higgins:

If you look at the detail of the firm and the background of the firm that produced the report for the department, their main business is providing facilities and services for the very, very wealthy. Really, if you are going to look at tax, you want someone who is objective and has not got a vested interest in getting wealthy people to come to the Island.

16. Deputy E.J. Noel of St. Lawrence :

I would just like to firstly pick up a point that Deputy Higgins mentioned. The firm concerned; yes they do advise wealthy individuals around the world and they were employed by us to produce a report purely on the basis of how can we attract and get more money out of high net worth individuals. So, they were the most perfect firm to choose to do that piece of work. They were not engaged to have a moral debate on our behalf as to the rights and wrongs of attracting high net worth individuals. They were employed to give us advice on how we can attract more of these people and benefit our economy. I would like to pick up a couple of points that Members have made. Senator Le Gresley mentioned that Guernsey, Gibraltar, Isle of Man and others had caps and they do and we do not. We have a minimum. So, we are not saying just come here to Jersey and give us £125,000 a year. We are saying come and give us a minimum of £125,000 a year. So there is a fundamental difference there. On the Deputy of Grouville 's point; 1(1)(k)s are going to be taxed at 20 per cent on their first £625,000 of their income and then 1 per cent thereafter.

[10:30]

That is what has been suggested. That brings me on to Deputy Southern 's point where he said that we could not verify someone's worldwide income, these high net worth individuals, and so how do we know what 1 per cent to charge on. He is perfectly right but I defy anybody to be able to verify any taxpayer's income because we cannot. It relies on a declaration and when you make that declaration, if it is false you are breaking the law so every single taxpayer in the Island we rely on the same thing. So I am afraid Deputy Southern has missed the point quite fundamentally there which brings me on to Deputy Tadier 's point and, again, if we did not have these individuals within our community, within our Island, then is he suggesting that we tax the remaining people in the Island at a higher rate to make up the shortfall or is he suggesting that we cut services because, at the end of the day, we have to balance our books and we have to provide the services that people want and deserve. To come back to Deputy Higgins' point, he asks for evidence. He does not see that there is any evidence that these individuals contribute to the Island. Well, there is £13.5 million that comes into the Treasury every year. That is pretty strong evidence. He says that he knows that these individuals do contribute to the Island because his own organisation in the past has received substantial sums from 1(1)(k)s in sponsoring the Air Show. There is a very well known 1(1)(k) who brought one of his business' aircraft over and had it in the Air Show and sponsored many events so he has seen the evidence at first hand. I saw the evidence at first hand of 1(1)(k)s over the weekend and I experienced it and there was some at Trinity Manor to celebrate its 100 years and I had not been to the Manor for something like 25 years until Sunday and it is a magnificent building. It is part of our heritage and we do not have to pay a penny to upkeep it. It is absolutely immaculate. Again, Deputy Higgins asks for evidence that 1(1)(k)s provide employment. For those who are fortunate enough to go up here, there is a photograph of the 11 staff that these particular residents employ. The evidence is there. One does not need to look very far and, yes, as probably my good friend, the Deputy of St. Mary would say, the evidence is not hard in that it is statistical but it is all around us and we can see it with our own eyes. If I see a burning candle in front of me, I do not need the evidence, the data, to say that if I put my hand in the flame, I am going to burn myself. It is plain for all to see. I would just like to remind Members that this debate is not about the rights and wrongs of a 1(1)(k) regime. It is about extracting more