The decision to abolish the economic benefit test

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WRITTEN QUESTION TO THE MINISTER FOR ECONOMIC DEVELOPMENT BY DEPUTY G.P. SOUTHERN OF ST. SAVIOUR

ANSWER TO BE TABLED ON TUESDAY, 28th FEBRURY 2006

Question

1. Will the Minister state whetherhe supports the decisionto abolish the economic benefit test made by the former EconomicDevelopment Committee on 13th October 2004 (as referred toin a written answer tabled on 14th February 2006 bythe Minister forTreasury and Resources) and will he set outformembers the grounds onwhichhisposition is based?
2. in the absence of theseeconomic benefit testminima,whatmechanisms, if any, are available tothe Minister to prevent non-local principals acquiring or setting upnon-financebusinessesinthe Island whichproduce little orno tax revenuefor the Island while taking uplabourand office resources?
3. would the Minister explain whether the decision to abolish the economic benefit test supports the Fiscal Strategy to maximisetax returns to fill the tax losses resulting from the 0/10policy?
4. will the Minister explain in particular how he intends to apply this decision tothe fulfilment industry? Answer

1. The formerEconomicDevelopmentCommitteeagreed that applications for Regulation ofUndertakingsand Development approval shouldbe treated ontheirownmeritsand that it should have regard to a balance of factors including, butnot limited to, thecreation of job opportunities andthecontinued training ofthelocal workforce, service diversification andstature.

N  ew businesses would still be required to provide estimates of their likely tax contribution to the Committee

when submitting an application.

I s upport the view of the previous Committee that the strict application of the economic benefit test was not in the interests of the development of the economy. The economic benefit test was generally applicable to the financial services sector. I will continue to have regard to direct taxation estimates. However, other factors

as identified in the Regulation of Undertakings and Development policy statement will be taken into account.

 I n the future I intend to work with the Housing Minister to ensure that, not only is the Regulation of

Undertakings and Development Law applied in a manner best calculated to ensure economic growth, but this strategy is run in parallel with the Housing Ministers application of the Housing Law.

2. Any person, be they local or non-local, requires a licence under the Regulation of Undertakings and Development(Jersey)Law, 1973, as amendedtocommence a trade, businessor profession in the Island. In considering applications, I am required, under the Law, to have regard to the need to regulate and manage demandonresources of Jersey andto protect the commercial and financial integrity of Jersey in commercial and financial matters. In addition, also to have regard to the Population and Immigration Policy recommendations adopted by the States inNovember1997andthe States Strategic Plan 2005. A policy document sets out the criteria considered in deciding upon applications. Licences are granted either unconditionally or subject to such conditions asappropriate.
3. The importantpointunderlyingthe need to move to zero ten isnot only compliance with international requirements butthereality of increasing tax competition from other similar jurisdictions. Thesechanges were debated at length inlastyear's fiscal strategy debate and we need to support high skilled, high salaried jobs tosecureour future prosperity.Goingforward,the Regulations ofUndertakingsneedstoreflect this changing situation. Abolitionofthe economic benefit test is entirely consistent with the fiscal strategy aswe

need to assess not only direct corporate tax yield but indirect yield too.

4. It is important to understand that there are differences between the way in which Regulations of Undertakings has been applied to different sectors of the economy. The States has expressly approved policies likely toseeeconomic diversification in the economy.The island benefits from high valueon line retailing whichis satisfied by fulfilment services companies. A policy for the fulfilment sector wasproduced in August 2005 and a revised policywillbeissued shortly.