Income Tax (Amendment No. 39) (Jersey) Law 201- and Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-

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A decision made 7 June 2011:

Decision Reference: MD-TR-2011-0062
Decision Summary Title:	Income Tax (Amendment No 39) (Jersey) Law 201- and Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-		Date of Decision Summary:	2 June 2011
Decision Summary Author:	Director – Tax Policy		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Income Tax (Amendment No 39) (Jersey) Law 201- and Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-		Date of Written Report:	2 June 2011
Written Report Author:	Director – Tax Policy		Written Report : Public or Exempt?	Public
Subject: Draft Income Tax (Amendment No 39) (Jersey) Law 201- and Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- :lodging for debate.
Decision(s): The Minister approved the Draft Income Tax (Amendment No. 39) (Jersey) Law and the Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- and their accompanying reports for lodging ‘au Greffe’ with a request for debate at the earliest opportunity.
Reason(s) for Decision: Draft Income Tax (Amendment No 39) (Jersey) Law 201- and Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- making changes to the tax treatment of individuals granted housing consents under Regulation 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations 1970.
Resource Implications: None other than those set out in the report.
Action required: Forward the Draft Income Tax (Amendment No. 39) (Jersey) Law and the Draft Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- and their accompanying reports to the Greffier of the States and request that the projets be lodged ‘au Greffe’ for consideration by the States at the earliest opportunity.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Income Tax (Amendment No. 39) (Jersey) Law 201- and Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-

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Treasury and Resources

Ministerial Decision Report

Income Tax (Amendment No 39) (Jersey) Law 201- and Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-

Purpose of Report

The purpose of this report is to brief the Minister for Treasury and Resources on the draft Income Tax (Amendment No. 39) (Jersey) Law 201- and the Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-. These amendments make changes to the tax treatment of individuals granted housing consents under Regulation 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations 1970.

Background

The draft Income Tax (Amendment No. 39) (Jersey) Law 201- proposes to introduce a new tax regime for individuals granted a housing consent under Regulation 1(1)(k) for the first time on or after the date on which the Amendment comes into effect.

In order for an individual to live in residentially qualified housing in Jersey it is necessary to obtain the consent of the Housing Minister under the Housing (Jersey) Law 1949. The applicant must fulfil one of the criteria included in the Housing (General Provisions) (Jersey) Regulations 1970. Consent may be granted under Regulation 1(1)(k) if the Minister is satisfied that consent can be justified on social or economic grounds and is in the best interests of the Jersey community.

The Jersey tax regime currently applied to those granted a housing consent under Regulation 1(1)(k) after 1 January 2005 is set out in Article 135A of the Income Tax (Jersey) Law. This provides that the first £1 million of income earned outside Jersey is taxed at 20%, the next £500,000 is taxed at 10% and a rate of 1% is payable on the balance. Income earned in Jersey is taxable at the standard rate of 20%.

Research

Since 2010, a review has been undertaken in order to identify ways to increase tax revenues from 1(1)(k) residents. As a first step, the minimum annual tax contribution expected from new 1(1)(k) residents was increased from £100,000 to £125,000 from December 2010.

Research indicates that the best way to increase the revenue and economic benefit from the 1(1)(k) regime is to attract more of these individuals and their wealth to the Island. The changes to the tax regime proposed in these draft amendments are intended to achieve this.

These changes are to remove the distinction between Jersey and non-Jersey source income for the purposes of calculating the tax liability of a 1(1)(k) resident, and to tax their income at the rates of 20% on the first £625,000 of income and 1% on all income thereafter.

Recommendation

It is recommended that the Treasury Minister (“the Minister”) should approve the Amendments to the Income Tax Law and Income Tax Regulations and the attached reports, and sign the declaration of compatibility with the European Convention on Human Rights and the Decision Summary, and that the documents should be lodged au Greffe so as to allow the Amendments to the Income Tax Law and Income Tax Regulations to be debated by the States at the earliest opportunity.

Reason for Decision

To enable the Income Tax (Amendment No. 39) Law and the Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201- and their accompanying reports to be lodged ‘au Greffe’ and considered by the States at the earliest opportunity.

Resource Implications

No additional manpower requirements will arise from the implementation of Amendment 39 and the Income Tax (Prescribed Limit and Rate) (Amendment) (Jersey) Regulations 201-. It is anticipated that simplifying the tax regime for future 1(1)(k) residents, combined with a greater focus on marketing and improvements in the application process, may allow the Island to attract up to 15 applicants each year (which is in line with current limits), each of whom would pay a minimum level of tax of £125,000.

Report author : Director – Tax Policy	Document date : 2 June 2011
Quality Assurance / Review : Head of Decision Support	File name and path: l:\treasury\sections\corporate finance\ministerial decisions\dss, wrs and sds\2011-0063 - i tax (amendment no. 39) law 1(1)(k) - wm\wr - report income tax amd 39.doc
MD sponsor : Treasurer of the States