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Increase in Tax Threshold for 1(1)(k) Applications

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A decision made 30 December 2010 regarding: Increase in the minimum tax threshold for persons seeking consent under Article 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations, 1970, on purely financial grounds.

Decision Reference:  MD-H-2010-0103 

Decision Summary Title :

Increase in the minimum tax threshold for persons seeking consent under Article 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations, 1970, on purely financial grounds

Date of Decision Summary:

30th December, 2010

Decision Summary Author:

 

Director, Population Office

Decision Summary:

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Type of Report:

Oral or Written?

N/A

Person Giving

Oral Report:

N/A

Written Report

Title :

N/A

Date of Written Report:

N/A

Written Report Author:

N/A

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

N/A

Subject: Increase in the minimum tax threshold for persons seeking consent under Article 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations, 1970, on purely financial grounds

Decision(s): The Minister has agreed that the minimum tax threshold for persons seeking consent under Article 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations, 1970, on purely financial grounds shall be increased from £100,000 to £125,000 with immediate effect for new applicants.

Reason(s) for Decision: To support the maximisation of revenue from high net worth migrants, being aware of the issues and work undertaken, and to accord with the recommendation and overall approach of the Minister for Treasury and Resources (as outlined on the 6th December, 2010, during the budget debate, extract from Hansard):

 

“Last year I committed to look at ways of increasing the contribution from the 1(1)(k) regime.  Since then the 1(1)(k) regime has been the subject of a lot of discussion in this Assembly, some of which has been negative.  The very small population of around 130 taxpayers contributes in the region of £13.5 million every year to the Exchequer, which if we did not have it would mean that G.S.T. would be 1 per cent higher.  I estimate that the indirect tax contribution that 1(1)(k) residents make through their spending and investment is conservatively between £50-70 million per annum.  In the last 2 years new applicants have also paid on average more than £3 million on their house purchases, contributing over £5 million to stamp duty revenues.  In addition millions have been spent by this group on refurbishing their properties, using local businesses, builders, architects and interior designers.  Our 1(1)(k)s also attract high-spending visitors to the Island.  I am told that that number alone is hundreds.  Their contribution for charities runs into millions.  I welcome our existing and prospective 1(1)(k) residents and their families to Jersey and I hope that a majority of members in this Assembly will believe, and continue to believe, that they make a substantial [Approbation] financial and economic contribution to the Island.  More than that, we continue to need to create the right environment which attracts and maintains our high-value residents.  Other countries, our competitors, are doing this and I think we can do more.  I did say that I committed that I would be looking at ways of increasing the revenue from 1(1)(k)s and as a first step I believe that we can increase the minimum contribution for all future applicants without harming our competitive position.  For that reason, I have asked the Minister for Housing to increase the minimum tax contribution for future 1(1)(k) category consents to £125,000 for all new entrants with immediate effect.  I also intend to develop a new high-value residents regime for new residents.  If we were to welcome 15 new 1(1)(k)s a year, this policy could bring around or in excess of £2 million of additional tax and significant other contributions to the economy. One issue which I have considered is that the current policy encourages current and prospective 1(1)(k)s to structure their investments outside Jersey, quite legitimately, before they move to the Island.  Jersey loses investment business, even if they have been persuaded to come here.  Other places do quite well out of this and that is something that I would like to change.  We need a simple and competitive tax regime that encourages high net worth individuals to bring their investment and businesses to Jersey.  Some of our competitors have a tax cap on liabilities but this actually limits the contributions to the Exchequer. In future, in addition to the change that I have already requested I plan to propose that all future high-value residents will be taxed on their worldwide income at 20 per cent on the first £625,000 and only 1 per cent thereafter.  This is a different and innovative approach [Approbation] which does not limit the financial benefits to Jersey but is more beneficial and competitive and lucrative to Jersey.  There also must be an increased focus on marketing.  We need to send a message out throughout the world that Jersey is open for business.” 

 

- Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011”. (P.157/2010)

Resource Implications: None.

Action required:

To update the published policies and to properly communicate the decision.

Signature:

 

 

Position:

 

 

Date Signed:

 

Date of Decision (If different from Date Signed):

 

 

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