Jersey tax and the EU
Thursday 23rd December 2010, 3:00PM GMT.
From Pierre Horsfall
I WRITE with reference to Sir Philip Bailhache’s letter published on Tuesday 14 December under the headline ‘This resistance to the UK Treasury deserves support’.
What actually happened in the late 1990s when the EU Code of Conduct of taxation was first announced supports Sir Philip’s views and is worth recounting. The code was destined to become a directive that had to be conformed to by all member states of the EU. Unfortunately, it stated that it would be observed by member states and their dependant territories.
The Jersey authorities immediately objected, pointing out that we were not in the EU, so any such directive would not apply and, furthermore, the UK had no power to tell Jersey what to do in matters of taxation, so the code could not bind the UK to enforce it in respect of Jersey.
The ultimate result of this was that the code was eventually amended by the EU to include words to the effect that it would apply to member states and their dependant territories within the ‘framework of their constitutional arrangements’.
This amendment was instigated by the UK and gave comfort to Jersey, to Guernsey and to the Isle of Man. All three subsequently engaged with the UK Treasury to try to find a way forward. This led to zero-ten, which was accepted by the UK Treasury.
In my opinion, the importance of the above amendment to the code has not diminished and it illustrates two important points.
The first is that, to agree and introduce the amendment, the EU clearly accepted that Jersey was not and could not be bound by an EU directive on taxation and, by the same token, the UK clearly demonstrated acceptance of the fact that they did not have the power to compel the Islands to comply with the code. While this is not news, it is a way of illustrating in a practical way that any disagreements and their resolution must lie between the Jersey authorities and the UK and nowhere else.
This does not mean that Jersey should not try to be a good neighbour to the EU or not try to seek accommodation with the UK but the authorities must continue to be mindful of the history of this matter so well laid out by Sir Philip in his letter. I am sure that this is the case and I am very supportive of our Treasury Minister, Senator Ozouf.
This letter is not intended for those that know the history first hand. Rather, I thought that as it is a matter that has potential to affect all of us, some of your readers might appreciate knowing some of the early history and have confirmation of the constitutional position so well illustrated by the underlying reasons for the EU’s early amendment to the code of conduct.