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1240/5(2110)
QUESTION TO BE ASKED OF THE PRESIDENT OF THE FINANCE AND ECONOMICS COMMITTEE ON TUESDAY 25th MAY 2004, BY DEPUTY G.P.S. SOUTHERN OF ST. HELIER
Question
Would the President inform members –
- whether the Committeehas considered the report of John Whiting of Price WaterhouseCoopers, and, if so, whether it agrees that the withdrawalofincome tax allowances will have a directimpacton the Financial Services Industry(FSI),as indicated on page 13of the reportwhere it states as many (senior members of FSI) are on some form of tax compensation'?
- whether the Committeehasevidence that such practice is common-place in the FSI,and, if so,towhat extent? and,
- whether the practiceof tax compensation' is regardedas a benefit inkind' under the rules adopted in the 2004 Budget?
Answer
- The membersof the Committee havereceived the reportbut have not yet had the opportunity to formally consider its recommendations. The Comptroller ofIncome Tax estimates that few individuals, perhapsless than 20, have their whole tax bill paid by their employer, either in the FSI or anyotherindustry.Wherean individual's tax bill is indeed paid by the employer,anassessmentis raised on that individual, grossed upat the standardrateof20percent.Forexample, if the tax paid by the employeron behalf of the employeeis £5,000, the amount assessed on the employee is £6,250.Itis grossed up to recover the compounded benefit arising from the employer meeting the tax liability of the employee. It is much more common for an employer in the FSI to pay the tax on the benefitsin kind provided to a group of employees. This practice will have no effect onthe proposal to withdraw income tax allowances so the Finance and Economics Committee does believe that this proposal will haveanimpacton the vast majority of thosein the FSI.
- Please see myanswerto(a).
- Tax compensation' has always been taxable as a benefit in kind on the employee,on the lines indicated at myanswerto(a)above. It is still assessable despite theintroductionof the rules adopted in the Budget 2004.