It looks like Guernsey is going to have to change its 0% tax strategy as a result of EU opposition. Apparently although the 0% rate complies with the letter of the EU code of conduct, it seems that some member states feel it is against the spirit of the code. This is probably because most member states have much higher rates of corporate tax than zero !

There seems to be broad agreement that a new flat rate of corporation tax will have to be introduced, possibly at 10%. This is the same as the tax rate in some other EU member states, so should be acceptable to the EU. There will probably be continuing exemptions for the mutual funds industry, and possibly also for the captive insurance industry.

One thing that does seem clear is that there is a genuine commitment from Jersey and the Isle of Man to work closely with Guernsey in coming up with a new corporate tax regime that will be standard across the three Crown Dependencies. This will minimise competition between the jurisdictions, and should help ensure the continued success of the financial services sectors in all these territories.