Income tax receipts from Jersey 1 1 k residents in 2000 and 2001

1240/5(1904)

QUESTION TO BE ASKED OF THE PRESIDENT OF THE FINANCE AND ECONOMICS COMMITTEE ON TUESDAY 24th JUNE 2003, BY SENATOR E.P. VIBERT

Question

Would the President inform members –

1. of the numberofJersey residents, towhom consent to purchase property hasbeengivenunder Regulation 1
   1. of the Housing Regulations on economic grounds, who paid tax in the year 2000 and 2001 and the total amountof this tax;
2. of the amount of tax paid by companiesowned by such residents in 2000 and 2001;
3. as towhatchecks and controls are exercised over such residents once they have settled in Jersey toensure that they continue to make a significant contribution toJersey'seconomy in view of this beingone of the requirements to be satisfied priortosuchconsentbeinggranted;and,
4. of the steps that have been take to ensure that tax avoidance and tax evasion are curtailed since the publication of the second reportof the Fiscal ReviewWorkingGroup, (R.C.37/99), presented to the States on 28th September1999,which highlighted the loopholes discovered by the tax avoidance industr' in Jersey.

Answer

1. I should like to start bysaying that membersshouldbeaware that decisions concerning Regulation 1(1)(k) are made by the Housing Committee in consultation with the Policy and Resources Department. The Comptroller ofIncomeTaxhascontactedtheHousing and Policy and ResourcesDepartmentstoobtain details of all those Jersey residents who have been granted 1(1)(k)housingconsents in the years since December1970,the date this Regulation came into effect. Furthermore, it must be remembered that after 17 years' residence in Jersey, these individuals potentiallycease to have 1(1)(k) status. Onlywhenhe has all those details can the Comptroller gothrough his files todeterminewhichofallthose1(1)(k)'swho came to Jersey since 1970 are still resident here andpaying tax for the years2000 and 2001. It is necessary to do this so that a comprehensiveand correct answer is given to this question, as some 1(1)(k)'shave died since coming to Jersey, others have leftJersey permanently and others who have been givenconsent have never taken uppermanent residency in Jersey. TheComptroller of IncomeTax estimates that itwould take at least 3 weeks,perhapsmore, to collate all this information and answer this question fully.
2. Once the ComptrollerofIncomeTaxhas verified the details referred to in (a) above,hecouldalso deal with this question within the same timescales given above. The benefit of the answers to these parts of the Senator'squestionhave to beweighed against the cost in time and manpoweroftheiraccurate determination. It might bemore beneficial forthe Senator to talkto the ComptrollerofIncomeTaxto see ifhisconcerns can be addressed more simply. If not, I shall give my replies to a future sitting of this House.
3. Once a 1(1)(k) becomesresident in Jersey, the Comptroller of IncomeTaxnotes his orherfile to ensure that a check is made,on a regular basis, that the 1(1)(k) in question is paying the tax contribution that wasagreed. Unfortunately, insomecases the individuals granted 1(1)(k) consent have financial reversesorsetbacksof one kind andanother,whichmeans that they areunable to pay their agreed tax contribution, although in some instanceswhere this has happened the tax contributions have resumed. It mustalsoberemembered that many 1(1)(k)'smake significant contributions to Jersey'seconomyinwaysother than through tax revenues, such asin relocating business to Jerseywhich provides localemployment,makingsubstantialdonationsto local charities and supportinglocalsporting and recreational activities.
4. Tax evasion and avoidance have been addressed inthefollowingmanner –

( i) the Comptroller of Income Tax has an investigation programme in place whereby taxpayers who evade

their taxes are pursued and the back taxes they owe are recovered. Those who evade their taxes not only have to

pay their back taxes but are also charged penalties and interest. In cases of serious fraud, the Comptroller prepares prosecution files for the attention of Her Majesty's Attorney General. In the last 4 years, over 1,100 taxpayers have been investigated and undisclosed income of over £31 million brought to light, with total tax, penalties and interest of £3.7 million brought into charge and collected. In addition, 7 taxpayers have been successfully prosecuted for tax fraud in the Royal Court since 1992;

( ii ) d es p ite assertions by some members to the contrary, the States last year passed legislation to counter

the effects of the misuse of benefits in kind'. Although it has only recently come into effect, the effects are already noticeable, and are being factored into predictions of future tax revenue. This legislation will ensure that those who previously managed to avoid paying tax on these benefits in kind' will now be taxed on many of those benefits;

( ii i) the Comptroller of Income Tax has allocated a dedicated officer to tackle the evasion and avoidance

perpetrated by some company directors who control their own companies. That officer ensures that any directors fees claimed in the company accounts are commensurate with the duties carried out, rather than, as in some instances in the past, the directors fees claimed having no relation to the amount of work actually carried out; and,

( i v) the proposed revision to interest tax relief, which I have just announced, will ensure that those who

reduce their tax bills by claiming interest tax relief on loans and overdrafts to purchase assets such as yachts, aircraft and second homes outside Jersey, will no longer be able to get such tax relief.

I should like to correct the possibly misleading implication that R.C. 37/99 was chiefly concerned with issues of tax avoidance. It was a well-researched and balanced review of the whole of the Island's fiscal system and policies, presented by the Finance and Economics Committee, and we shall continue to refer to it in the course of our current fiscal review. In particular I should like to remind members, particularly new members who may not have read it, that the authors of the report, set out the following guidelines –

( i) l o oking at fiscal policy in the round and not adopting individual fiscal measures in isolation; ( ii ) c o nsidering the proposals in the report as a package and not individually;

( ii i) fiscal policy being seen as part of a long-term strategy for the Island;

( iv ) re s i sting the temptation to engage in ad-hoc decisions unconnected with and therefore likely to be

in conflict with the underlying long-term strategy;

( v ) c o n sidering any fiscal measures which might be proposed by others within the framework of the

report as a whole; and,

( v i) e n g aging in a comprehensive dialogue with all those likely to be affected by any of the measures

referred to in the report.