ARCHIPELAGO CAPITALISM; GUERNSEY’S ACHILLES HEEL?

Archipelago Capitalism;
Guernsey’s Achilles Heel?
Corporate Social Responsibility,
Taxation and The State

ABSTRACT
As a small island, Guernsey has historically developed a unique relationship with the
financialisation of its economy. The impact of recent recessions and economic instability
forced the island to a crossroad; adopt a drastic tax regime, or continue with existing sectors.
The island chose the former under a strategy identified as the 'zero-ten' tax regime.
However, there is a lack of investigation on the perception of islanders towards their new
quality of life during the implemented financial and tax regime. This research, therefore,
explores how Guernsey islanders' perceive their quality of life and how it is impacted by the
changes in tax regimes and the development of the offshore financial centre in this particular
under-researched island.
A mixed-methods procedure is employed, utilising primary research in the form of a
questionnaire and interview, whilst secondary desk research comprises governmental records
on Guernsey's financial income, social budget and taxation methods.
The research found that despite an overall good perception of the quality of life, the tax
regime's cost impacts specific islanders more significantly than others, benefiting mostly
those in finance, the legal system and those interacting with financial mechanisms.
Furthermore, non-financial industries such as the creative sector and tourism are not as well
supported compared to the finance sector.
The research highlighted that despite Guernsey's benefits from the tax regime and offshore
centre offered in transforming small island economies to compete in globalised markets,
upskilling workers and increased pay, specific life qualities are diminished for islanders.
This research is the first of its kind for Guernsey, assessing islanders' perception and
interpretation of how the tax and financial regime impacted them.
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ACKNOWLEDGMENTS
I would like to express my gratitude to those who dedicated their time or provided resources
that help credit the dissertation. First and foremost a special mention to my Supervisor David
Monciardini, for showing continued support and brainstorming during the whole academic
process. Thanks to individuals at the Guernsey States department for answering queries and
the library resources for providing essential archived materials. Thanks to the community and
family for contributing feedback and authentic answers. Finally, appreciation to Erin Cooney
for working with me in designing the beautiful and original front cover.
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TABLES OF CONTENT
1.0 INTRODUCTION…………………………………………………………………… 4-8
2.0 LITERATURE REVIEW:....................................................................................... 8-10
2.1 REVIEW OF GUERNSEY’S SOCIAL CHARACTERISTICS ……………..…………...10-13
2.2 TOURISM, ARTS AND COVID-19……………....…...……….…………...… 13-15
3. METHODOLOGY ……………....…...……….…………...… ……………….……..16
3.1 DATA COLLECTION ……………....…...……….…………...… ………….. 17-18
3.2 DATA ANALYSIS ……………....…...……….…………...… ………….. ……...19
3.4 RELIABILITY AND VALIDITY ……………....…...……….….…...… …………..20
4. ANALYSIS OF FINDINGS AND DISCUSSION
4.1 A MACRO OVERVIEW OF THE IMPACT OF THE ZERO-TEN TAX REGIME
4.2. A MICRO ANALYSIS OF THE IMPACT OF THE TAX REGIME …………………….23-26
4.2.1 PERCEPTION OF GUERNSEY'S QUALITY OF LIFE
4.2.2 EVALUATION OF GUERNSEY’S TAX STATUS…………………………………………...26-29
4.3 QUALITY PERCEPTION OF SECTORS
4.4 PERCEPTION OF TAX REGIME……………………………………………………………….29-33
4.5 IMPACT OF COVID-9 AND BREXIT……………………………………………………..33-35
5. RECOMMENDATIONS ……………………………………………………………...…35
6. LIMITATIONS………………………………………………………………………….. 35-37
7. CONCLUSION ……………………………………………………………...………… 37
8. REFERENCES……………………………………………………………...………… 38-42
9. APPENDIX……………………………………………………………...…………..…42-47
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1. INTRODUCTION
The successful rise of the first Swiss and European tax haven to protect against the
repercussions of the 1929 depression, instigated the mass adoption of global offshore
locations in the early 20th century (Raposo & Mourão, 2013). This was followed by the
meteoric rise of small islands, microstates, and overseas territories that now comprise most
tax havens, offshore financial centres (OFC) and other synonymous competitive tax offerings
(Dharmapala & Hines, 2009). Today, the topic of preferential tax regimes again re-emerges
on the political agenda as the world faces extortionate costs from the recent economic
volatility of the global financial crisis in 2008 and the 2020 global COVID-19 pandemic
(Wójcik & Ioannou, 2020).
Financial and academic literature has covered fiscal responses from tax and financial islands
during times of stability and distress, such as the largely shamed Panama, identifying the
disparity between the 'offshore winners' and 'in-land losers'. However, internally for islanders,
this triumph of the offshore's success has not significantly considered the quality of life they
experience; literature on the islanders' quality of life and the impetus for their adoption of tax
regimes remains ambiguous.
Guernsey is one island nation and a self-governing British Crown dependency (except
military protection) that forged a path from a previously impoverished economic history of
privateering and smuggling, into an offshore financial powerhouse, with a powerful market
and jurisdictional capability (see Map 1). Guernsey’s success in financialisation was
accelerated when it changed its tax system, primarily offering zero corporation tax in 2008
following its sister island Jersey and the Isle of Man in the closeby region. The momentous
tax policy that would affect islanders long-term came in of a future Economic and Taxation
Strategy’ committee meeting in 2006 (States Of Guernsey, 2006) detailing the necessary
reasons in becoming a low corporation tax jurisdiction, known as the ‘zero-ten’ regime (10
countries with 0 percent corporation tax). However, the tax regime was not isolated just on
tax specifics; the policy helped to create a favourable environment for the inward transfer of
high wealth.
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However, politicians (known as deputies) also recognised the impact the tax and economic
strategy could have on islanders: Its success {the tax regime strategy}, or otherwise will
significantly impact on the future government and well-being of the Island. (States Of
Guernsey, 2006, p.2) The impact of the zero-ten is acknowledged to be significant; at the
time, deputies promised to protect low-income islanders as a core priority.
Map 1: Channel Islands (Bailiwick of Guernsey and Jersey)
(Hermes, 2018)
Considering that Guernsey, being a financial archipelago of the Channel Islands, administers
over twelve different islands under their bailiwick, with a population of 63,155 (at 2020), but
has been seen for the most part, as an isolated island in the English Channel (see figure 1)
surprisingly Guernsey is largely unexposed academically partly due to the secrecy of finance
and geological remoteness.
Guernsey’s financial attractiveness has morphed the island into a big-player in cross border
finance. As an overview in 2019, Guernsey managed and administered assets in excess of
£227.7 billion of net asset value worldwide (Frontier Economics, 2020), which is one of the
largest in Europe. Therefore, given the enormous flow of capital, Guernsey’s relationship
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between finance and the state is apparent. This advantageous tax offering that is attracting
such an inflow of finance as ‘unfair competition’ is the core argument that critics of OFCs
and tax havens assert in the public domain.
Figure 1: Picture of Guernsey’s capital, St Peter Port
(Hall, 2020)
Those in the 'grey' area of governance continue to justify internal and island development as
financial centres have upskilled education and enhanced pay for citizens, for example,
Singapore, the Cooks islands or Jersey, with the latter financial centre promoting the
islanders' success with 'A Prosperous Island, Story of Jersey' exhibition (Jersey Finance,
2019). Guernsey, like others, is similar in the continued attempt to promote the success of
their OFC and the future for their islanders, with their government establishing a policy
strategy in 2016 titled 'Our Place in the World', highlighting internal wellbeing goals and
foreign aid as a specific target:
“We will be among the happiest and healthiest places in the world, where everyone has equal
opportunity to achieve their potential.” (States Of Guernsey, 2016, p.60.)
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Finally, superficially the benefits of the tax status appear very apparent, i.e. attracting an
immense wealth to the island. However, from another perspective, the direct benefits to
citizens are difficult to gauge when wealth is non-taxable and presents in obscurity
(Rawlings, 1999), questioning how the OFCs impact the islands that corporations offshore to
- in this case, the citizens of Guernsey.
This research aims to investigate how islanders perceive their quality of life under this capital
intense and market-dominant jurisdiction, from both the perspective of abundances and
scarcities and particularly when discussing islanders' points of view and from the other
islands under its Bailiwick administration (see table 1). The research attempts to go beyond
the extant and polarized debate between promoters and opponents of the zero-ten tax regime
and investigate islanders' quality of life in a non-biased way, neither exaggerating nor
diminishing the tax regime's impact.
Therefore, the research question is as following;
What are Guernsey citizens’ perceptions of the zero-ten tax regime and what are its impact
on their quality of life?
Table 1: Archipelago of Guernsey
In addition, this dissertation is structured as follows. First, through a review of the literature,
the section attempts to establish Guernsey’s island development and the type life qualities
that islanders enjoy under the financialisation of the economy. Section 3 outlines the
methodology used to investigate the relationship between the tax regime and life qualities
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enjoyed by islanders. Finally, section 4 highlights the analysis of the findings. Broader
implications are explored and discussed. Section 5 details condensed recommendations
followed by limitations and conclusion.
2.0 LITERATURE REVIEW:
Despite the paucity of literature relating to Guernsey's relationship with financialisation,
other academic literature concerning islanders' quality of life is still accessible. State records
on government income, housing, welfare, social spending and other qualities of life that
existed before and after the implementation of the zero-ten regime are widely available and
periodically monitored; whilst other life qualities and relationship on taxation such as the
States of Guernsey's inquest into poverty and taxation is relatively nascent.
Externally, literature exists on a wide range of island attributes, with an acknowledgement
that there is no single theory about the development of offshore financial centres and its
impact on islanders (Sigler et al., 2019). However, selective and often isolated economic
perspectives amiss the fundamental island characteristics covering political, juridical, social
and cultural influence on island development known as Small Islands and Developing States
(SIDS), which the UN lists. This is where the islands share similar development challenges
and are in similar development stages, which have a high dependence on international trade,
high infrastructure costs and lack of economies of scale, e.g. (Fiji, Cayman and Bermuda).
Scholars in both offshore corporate governance and island development understand the
complexity of introducing juridical and economic services on islands; therefore, island
studies require a more holistic and transdisciplinary approach (Kakazu, 2014). Whilst
Nissology (Greek for the study of islands) contributes to the broad theory relating to the
development theory of island nations (Mccall, 1994). As the academic Grant McCall asserts,
“islanders themselves and their way of seeing things is not much appreciated” (Mccall, 1994,
p.6) during times of change and island development. The perspective for islanders could be
seen as a viewpoint of necessity; many island states have chosen to develop into financial
centres to improve their prosperity, wealth and attractiveness, and to deviate from declining
agricultural industries (Kakazu, 2014). The options often appear binary; keep the status quo
by retaining mostly agricultural and tourism practice, or adapt and become more affluent, but
tax poor and dependent on external markets (Cobb, 2001).
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This means that Guernsey, like many other islands, have had to compensate for their
‘smallness’ by adopting a radical competitive advantage and holding equal footing against
other superpower nations. The process of competitive advantages is often executed through
commercialization of imaginative resources, as seen with discrete tax shelters, citizenship for
sale, internet domains or, in the case of Guernsey, its 2008 zero-ten regime. Consequently,
this produces a very dynamic relationship between the states and corporations, of which both
benefits and disadvantages impact islanders.
A corporate scholar expert, Christopher Bruner, elaborates the OFCs necessity for islands
further, identifying characteristics for market development and recognising the proximity
between small island nations and the transition to offshore financial centres. Christopher
mentions the transition of language to describe the diverse ‘tax islands’. The terminology
used to label jurisdictions has largely shifted, from the pariah and general term of ‘tax
havens’ as the OECD acknowledged it could apply to ‘any and all countries to a certain
degrees’ (OECD, 1998) then moved towards new terms and structures of the OFC specialised
fiscal services, as a consolidated term that uses financial frameworks (Tobin & Walsh, 2013).
He identified the transition of islands states into financial centres as Market Dominant Small
Jurisdictions (MDSJ), which comprise two major attributes. MDSJ are naturally small and
poorly endowed, with natural resources limiting their economic development options; MDSJ
possesses legislative autonomy (M. Bruner, 2017), and is vulnerable to international
volatility, which would fittingly describe Guernsey, due to their independent crown
dependent laws, currency and banking system.
These island identifiers are crucial in understanding the different types of life qualities that
impact islanders. SIDS are often less infrasctural developed and less dependent on finance as
the primary economic driver, and are often beset by high public costs with irregular
transportation, education and infrastructure, but benefit from the close attachment with
cultural and artistic traditions (UN-OHRLLS, n.d.). This could be considered in the stage of
early island economic development. However, many transfer to the MDSJs and enjoy and
benefit from high GDP relative to the world average - giving the impression of economic
strength and could be considered in later stage development. However, the cost is that often
the islands face multinational lobbying, loss of autonomous regulatory decision making and
loss of cultural and artistic traditions (Tobin & Walsh, 2013).
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Based on the available literature, there are observable transitions in using financial and island
terminology; the OFC lexicon is more evident than tax havens in providing technical
services; similarly, 'market-dominant islands' provides more juridical and legal scope
compared to previous 'small island developmental states' (IMF, 2007). In both cases, the
transition of the concepts is based on loose and general characteristics that move to more
specific and complex concepts.
2.1 REVIEW OF GUERNSEY’S SOCIAL CHARACTERISTICS
Despite its economic attraction, Guernsey hits rock bottom on some key social issues, due to the
camouflage of the unfounded international consensus ‘Island life must be paradise,’ where their
financial attraction is always enough for social development. This paradox is the main area of
the research problem that links to the ‘Achilles heel’ part of the dissertation. For example, 41%
of Guernsey’s GDP is solely contributed by the finance industry (States Of Guernsey, 2018), and
the additional 11% contains some sectors that further support the finance industry such
professional, business, scientific and technical activities that could contribute more than the
original figure.
When a single sector saturates a GDP of a country, and the state provides a too high level of
credit per GDP, it can create a potential economic phoneme called the ‘finance curse’; too much
finance poses a negative capital (Shaxson & Christensen, 2013) low social return and fosters
inequality (Arcand et al., 2012). This is where the financial sector goes beyond the useful size
and leads to negative spillovers, which creates a resource or service dependency, thus inducing
negative effects such as; hindering entrepreneurialism and by crowding out manufacturing and
non-financial services, promotes rent-seeking behaviour by selling a residence, citizenship for
example and generates non-value-adding sectors. This then impacts citizens by limiting choices
from dependent sectors and further creates negative incentives, such as lobbying from finance
groups on State decisions (Christensen et al., 2016).
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This is compounded by fewer local employment in the finance industry. Guernsey had nearly
18,000 incorporated companies but with only 11% local employment in 2018 (BBC, 2018).
Furthermore, this can create a gap in essential non-finance sectors such as social service
provisions that islanders would have to try and fill or import more expertise from abroad. This
could result in islanders being excluded from more wealthy industries. One of the recurring
issues that the States of Guernsey have been attempting to address is the burden of relative
poverty, investigating how, despite the immense wealth, does this still occur.
Firstly, one must question this apparent social dilemma, given the attraction of a strong
economy; defining what quality of life means for Guernsey is an important issue. Guernsey
follows the OECD principles and guidelines as a suitable benchmark on good life qualities.
The OECD identifies a specific criterion, whilst the WHO adopts a broader perspective
focusing on individuals' perception of their position in life (WHO, 2012). This adds a degree
of complexity to the research, specifically in identifying a simple objective of 'How's life?' As
an important metric, Guernsey utilised the OECD's better life indicators and framework to
help benchmark Guernsey's vision as stated; "among the happiest and healthiest places in the
world." (States Of Guernsey, 2016, p.60.).
However, the States of Guernsey recognise the same issues in quantifying objective levels of
poor social indicators and poverty. A general benchmark that Guernsey has set is the "minimum
acceptable way of life" (Gordon et al., 2002), where people are defined as living in poverty if
they are unable to afford so many of the 'necessities of life' that are their standard of living and
which are below the minimum considered acceptable by the majority of islanders. However,
social issues in Guernsey are specific; with an absence of street homelessness, low household
debt and low crime rates, few of the usual suspects are apt in explaining existing issues
(Guernsey Community Foundation, 2016).
In the 2019 poverty report, more than one in five islanders were classed as being at risk of living
in relative poverty. In 2017, 60% of pay below the median net equivalised annual income was
£19,461 (States Of Guernsey, 2019). This is the amount of income remaining after housing
costs, social security contributions and taxes that have been paid and was one of the main
poverty benchmarks. The distribution of average pay of households shows the cluster of pay
among households; the largest household groups are at the lowest quartile but show disparities in
the middle earners as the highest end of the distribution earn over £200,000 increase in number
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(see figure 2). In addition, inequality as a quantitative analysis was also noted; the Gini
coefficient for gross equivalised income was in a mid-range 0.39 in 2017.
Furthermore, in the report, nearly 63% of lone parents suffering from poverty, in some instances,
face greater difficulties than poor people, compared with the UK, in keeping their homes free of
damp, keeping warm in winter and are faced with higher medical costs (States Of Guernsey,
2019). This was largely due to the cost of living with a single member of a household and
especially jarring for single parents. Rejections of new corporate, high earner taxation structure
are general income tax had been present in internal literature. The rejection of taxes impeded
change; this is well documented with one of the first State responses in 1998 regarding a petition
of low-income earners and households (Billet VI, 1998), where the issue of taxation proceeds
the zero- ten structure (see appendix A).
Figure 2: gross annual income of households
(States of Guernsey, 2020)
However, despite the inequality, high housing costs and elements of poverty, the OECD
quality of life still scores Guernsey highly. Starting with the most ranked on the ‘economy’
indicator, ‘quality of life’ then ‘place in the world’ (see table 2) with an average score on life
satisfaction, Guernsey citizens rating their life satisfaction as 5 or more on a scale of 1 to 8
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(States Of Guernsey, 2019). The OECD average was 6.5 on a scale of 1 to 10. Whilst
recognising that Guernsey has opportunities to flourish as an island, some of the challenges
for improved life qualities seemed to be absent from OECD’s scoring. Some further input
from declining sectors and the more recent impact of COVID-19 aids in better illustrating the
literature on Guernsey’s life qualities.
Table 2: OECD Better Life Indicators For Guernsey
(States Of Guernsey Data And Analysis, 2019)
2.2 TOURISM, ARTS AND COVID-19
Based on the theory of island development, islands and microstates economies are
significantly influenced by tourism, often being one of the largest contributors to GDP; island
governments typically allocate structured planning for visitor events (Mcelroy, 2003).
However, based on Guernsey’s financial development, tourism is another sector that has been
in steady decline. The number of visitors making direct stays in Guernsey has decreased since
2003 by 27.41% to 2018 (States of Guernsey, 2020). A significant factor was the impact of
the financial crisis of 2008, limiting inbound tourism. However, infrastructure and extended
aviation and maritime runways had not been met to increase capacity and appeal to travel,
with relatively high travel costs for tourists; other challenges are tourist experiences and the
lack of tourism development. Furthermore, Arts, entertainment and recreation were the
largest declining gross value-added sectors between 2014-2019 by 39% (States of Guernsey,
2020). It is difficult to pinpoint an exact underlying reason for declining industries outside of
external influences.
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The 2020 COVID-19 impact required greater state funding for community protection, with a
five million pound sterling fund to help alleviate significant hardship for those not entitled to
social benefits. Food charities were set up to provide more free meals and volunteer groups to
help medical needs require assistance (Guernsey press, 2021). Small businesses and
self-employed people were also affected, as the high street crisis deepened with more shops
shut for good; around 20 shop units in the centre of town are currently vacant as the vacancy
rate jumped to 17.1% from 16.3% in late 2020 (Guernsey press, 2021). It was not just the
immediate social impact; long term implications to state funding and accessibility to capital
were in question in 2020 when the Guernsey States pledged borrowing of 500 million
pounds, with 100 million pounds coming from the island’s ‘rainy fund’ to cover the ‘black
hole’ of immediate funds (ITV News, 2020).
Furthermore, based on the State literature, charities have played a vital role; however, it was
not just during the covid pandemic, overall, Guernsey has 558 active charity groups that are
addressing scarcities of funding in essential needs - such as cancer support groups,
ambulances, public schools to food banks. (Guernsey Registry, 2020). The Guernsey Registry
and the Association of Guernsey charities monitor the incorporation and type of charity on
Guernsey. Based on the literature, the change in tax status in 2008 coupled with the 2008
recession led to the dramatic explosion of incorporated charities (see figure 3) partly donated
by members of the community and companies involved in corporate social responsibility and
possibly used as a substitute to government social investment. Overall, the listed types are
delivering medical services, community support services and children and youth (including
school donations) (see figure 4)
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3. METHODOLOGY
The primary research aim is to understand islanders’ perspective on the development and
change of quality of life due to the current zero-ten tax regime and presence of OFC. First,
secondary research analyses States accounts and funding from 2003 -2020 at a macro level to
determine how the tax regime impacts state income and the financial viability of the island
from comparative years. Secondly, primary research has a social perspective and was split
into multiple parts: first, it consists of a questionnaire ‘life on Guernsey’ and then further
interviews with respondents were conducted. A purposive sampling system was used, as this
identified and evaluated responses from conflicting perspectives, from different
socio-economic groups, those working in finance, politics or unemployed and with a range in
ages. The methodology is broken down (see figure 5) to help triangulate data points,
synthesis and corroborate results between the research methods to finally produce aggregated
themes.
Figure 5: breakdown of methodology
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3.1 DATA COLLECTION
Data collection took place between January 2021 and March 2021, and it was completed in
three intertwined steps. Firstly, a questionnaire was sent to a diverse selection of financial
institutions, government officials, charity groups, social workers, and educational workers,
receiving 23 responses (N=23), with an average age of 36 years. Secondly, an open-ended
interview was employed for willing participants to further discuss and elaborate on
questionnaire responses. The 7 interviews were all audio-recorded and again consisted of
different individuals such as deputies, students and those working in finance (See appendix B
for a complete list of participants and length of interviews).
The questionnaire started with overall quality of life experiences, then moved to more
specific perceptions of sectors and then to the interpretation of tax terminology Finally,
external factors of Covid and Brexit were considered. Examples of questions from the
questionnaire were “Does the benefit of Guernsey's tax status outweigh the cost" what makes
Life on Guernsey good"?).
In the questionnaire, for questions that required a ranking response, (e.g Overall, does the
benefit of Guernsey's tax status outweigh the cost?) a 10 -point Likert scale was considered
more appropriate in allowing a greater degree of ranking choice, instead of the limiting
5-point Likert scales (Woo Lee, 2016). In the questionnaire, if the question was framed
positively (benefit) the maximum 10 points would be the best outcome; in the negatively
framed question the maximum 10 points would be the worst outcome. In total, the
questionnaire comprised 16 questions:
●
●
●
●
Three 10 -point Likert scale questions
Two, yes/no questions
Six direct single line answer questions
Five expanded questions
The respondents' backgrounds were largely identified with job status, residency and age; the
classifiers of characteristics such as job sectors helped to identify socio-economic differences
in perception. In total, the 23 participants had a range of 12 job sector types (covering
Finance, Education to Politics), apart from students/unemployed who are not currently
working, and a demographic average age of 36 years.
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The largest share of respondents (34%) worked in Finance and lowest were students (4%)
(see figure 6 for full breakdown). Furthermore, 65% were identified as local, 26% as
established, and 9% were open (see Appendix C). This is in line with the local and foreign
demographic of the island as in 2019, Guernsey had a 60.1% locally born population, with
the next highest proportion being born in the United Kingdom or the Republic of Ireland
27.1% (Gov.gg, 2020).
Figure 6: Respondents job sectors breakdown
Data collection from a codified open-ended interview facilitated greater and more meaningful
responses, where a reasonable sample size of 7 respondents was obtained for the open-ended
interview. Quirkos software was used in the qualitative analysis of the transcriptions, in order
first-order responses and then to identify themes.
The research design incorporated a diverse range of participants and age groups to increase
the validity for the generalization of results (Polit & Beck, 2010). Demographics were mixed,
but typically, participants have already been working in their chosen industry and were
typically older (23-60). This purposive selection is also to ensure that no children or minors
are considered. Male and female participants were fairly mixed: 9 females and 14 males.
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3.2 DATA ANALYSIS
The intention of the primary research was to also corroborate the desk research findings and
to synthesise any significant extrapolations; which is why the questionnaire was followed by
the open-ended interview where a thematically coded analysis of the primary research was
employed. Sections of the transcripts from the open-ended interviews are used as supporting
evidence in the dissertation, nested with research quotations. This helps in explaining
opposing responses from participants, and can illustrate why there are such varied
perceptions. Audio was converted to transcripts with machine learning software
“TranscribeMe '' and then manually edited by the author of the dissertation, which increased
the speed and lowered marginal errors in the extraction process.
The results were analyzed and then compared with other participants and remained
anonymous unless stated otherwise. For non-face to face interviews, Zoom as a platform was
used to record the video and audio of the interviews, with participants completing a consent
form beforehand. As required, the research anonymised the names of participants but retained
the participant’s job title and sector. This assists in connecting socio-economic status and
perception of the development in quality of life from Guernsey’s tax regime.
Whilst secondary research analyses Guernsey's governmental records on state income from
corporation tax and other individual and duty taxes during 2003 to 2020, when in 2008, the
zero-ten corporation tax was incorporated. Furthermore, governmental records on the creation
of the social fund and charity support during the covid pandemic is also analysed with the
States' accounts, as the prevalence and size of charities, supported by NGO and third sectors,
are increasingly used as an indicator to describe the absence of social services and
insecurities that significantly contribute to the characteristics pertaining to the quality of life
(Gentilini, 2013).
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3.3 RELIABILITY AND VALIDITY
With the extensive range of content encompassing the research question covering the
characteristics of tax and regulatory demands, the chosen research question was specifically
identified as having a high level of construct validity, meaning the degree to which the test
legitimately measures what the research claims (Colliver et al., 2012). Triangulation of
research sources; state income post-2008, change in corporate taxation and public survey
instruments and primary research helped build the relationship between the perception and
experience of life qualities during the implementation of the zero-ten tax regime.
To increase the reliability of respondent's interpretation, an early pilot test was used to help
participants understand the meaning of the questions and the flow of the interviews. One
amendment in the final version was the inclusion of the 'established' option for residency
(foreign residents are allowed more local status rights after living for numerous years on
Guernsey), which offers more citizenship rights than open residency.
4. ANALYSIS OF FINDINGS AND DISCUSSION
4.1 A MACRO OVERVIEW OF THE IMPACT OF THE ZERO-TEN TAX REGIME
The findings of this dissertation begin with the analysis of macro-level secondary data regarding
States of Guernsey’s accounts and then transitions to a more fine level analysis of primary data
from the questionnaire and interviews.
After recording Guernsey’s state income from their public financial accounts and the breakdown
for corporate income and duty prices (including inflation), the findings indicate revenue from
corporation tax decreased from 2003 to 2020 by 68.33% (see figure 7) whereas Tariffs (duty
prices) increased by 34.78% from the same period (see appendix D for overall State income).
This means goods such as alcohol, food and other imports, which comprise a large part of daily
needs, have become more expensive as a cost of living in Guernsey and not just the result of a
more expensive transport cost - the impact of the tax regime is direct on the cost of living.
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Figure 7: Revenue from corporation tax and inflation; 2003-2020
Finally, the received state income fluctuated more than the other financial indicators; from 2008
it had decreased by 20% compared to 2012 but had recovered more sharply at the start of
2015-16; by 2020 overall state income had increased on average by 28% to £447 million (see
appendix D). The issue is that there is no counterfactual or comparison of what income would
have been generated, including the possibility of ‘capital flight’ if corporations were taxed at a
higher rate, it would mostly be at a conjecture without accurate and detailed modelling.
Furthermore, on collecting and analysing states financial records, further literature on States’
action regarding charities support was published in accordance with the Guernsey social
investment fund that was established within the 2018 Budget report because of the cost of Covid
on charities. The social fund was used to help COVID-19 charities that played a role in
Guernsey’s pandemic response and which needed funding. As the chair of the fund, Jurat Jones,
said: “2020 saw the Social Investment Fund set up but then immediately re-prioritise its strategy
to better serve the needs of the community and local charities at a time of crisis” (Social
Investment Fund Guernsey, 2020.)
The Policy & Resources Committee highlighted the serious impact the COVID-19 pandemic has
had on Guernsey's public finances in the 2021 Budget. After a surplus in 2019, 2020 saw an
estimated overall general revenue budget deficit of £59m with a £23m deficit forecast for 2021.
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However, despite this, no major tax changes to its tax regimes were introduced in its 2021
budget, possibly due to the States considering a future-facing plan on what taxation would be
needed for the island, where opponents and supporters of the zero-ten regime might delay
changes due to a deadlock on a policy consensus.
The impact of the previous 2008 financial crisis had a similar appeal for financial support to help
support struggling charities. COVID-19 might, as did the previous recession, promote the
incorporation of charities groups at a time of need, especially because of the state budget deficit,
which could further limit social investment. In this way, the current tax regime impacts the
potential income stream of corporations and challenges the fit for the purpose of the zero-ten
structure if the taxation rate stays the same when islanders are left with long term social
implications and reduced investment.
One of the main marco findings from the state accounts was identified in the advisory and
scrutiny report, which justified the change in the tax regime close to the 2008 financial crisis,
recognising that there would be no alternative based on the government modelling to adopt to
the zero-ten model. This is in line and supports the literature on the reasons islands transition to
different tax and offshore jurisdictions:
“There is no alternative but to adopt the 0%/10% (zero-ten) model. Continuation of a 20%
regime would see financial services companies seeking to reduce their tax burden by moving
to jurisdictions enjoying lower rates. This would have repercussions for the Island’s economy.
(States Of Guernsey, 2006, p.4)
This justification of lack of employment was the crossroad for Guernsey to adopt a drastic tax
regime or to continue with existing sectors. This is in line with the literature regarding
reasons for tax competitiveness and relates to the finance curse of over-dependency of
finance for large scale island employment.
However, the ‘no alternative’ policy over time developed into different forms and sees Guernsey
more as a willing participant, as the contents, reporting and financial requirements since 2008
has changed dramatically. Originally the 2008 ‘zero-ten’ regime was largely unadulterated and
its purest form, however after years of EU requirements, negotiations and internal consulting the
list of requirements and changes to the tax structure fundamentally changed the tax regime.
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First policymakers increased a 10% corporation tax for specific utility companions, anti money
laundering legislation was tightened, tax transparency with common reporting standards was
agreed. Substance laws and green initiatives, requiring a threshold of physical assets and local
employment was introduced.
In summary, the findings from state accounts and government records demonstrate the increase
in the cost of living with the rise of goods and tariffs from 2008 that was used to 'plug the gap' of
state income in 2008, which resulted in increased living costs and decline in corporation tax
revenue. The research, in addition, identifies changes in reporting and legalisation over the years
and also showcases the change and evolution of the zero-ten tax regime. The secondary research
findings quantify the tax regime's impact in the research question and will help corroborate
results between respondents and the secondary research. The following primary research
findings can help illustrate the islander's perception of the tax regime and its impact.
4.2 A MICRO ANALYSIS OF THE IMPACT OF THE TAX REGIME
4.2.1 PERCEPTION OF GUERNSEY'S QUALITY OF LIFE
The primary findings start with the perception of overall quality of life moving to perception of
sectors, tax regime and finally ends with external factors of Brexit and COVID-19. The findings
were supported throughout by the interviews where the overall themes related to the tax regime's
advantage of high income, other advantages trickled down to other benefits such as community,
security and lifestyle. Whilst, the challenges of living within Guernsey’s tax structure were cost
of living, distribution of COVID-19.
While the overall quality of Life On Guernsey resulted in a high score of 8, (see question 1 in
table 3) and was closely aligned to the OECD ‘Our Quality of Life results (see tables 2&3) the
benefit of Guernsey's tax status outweighing the cost question (see question 2), scored a mid
average score of 6, this is despite a high perceived quality of life on Guernsey. The conflicting
results between the quality of life scores and the interviews seemed to relate to a broader version
of the island's potential and not just the quality of life enjoyed by them directly. The lowest
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scoring response emerged from question 3 on the interaction by the finance sector scoring a low
4.4. Themes from the interview results were also corroborated with the questionnaire and are
explored below.
Table 3: Life quality rankings
The interviews further explained the high overall quality of life, as stable income provided
added by-products such as social and financial security, which contributed to the strong
community, as respondent 4 stated:
“I think in in terms of having grown up here, it's safe and, and secure place in the sense that it
has low crime rates “But I think also there's the economic point of view, which is that it's fairly
prosperous, it's very well off, you can earn a decent income and have long term security, which
is needed with the devastation that is Covid.
This is one core benefit of the tax regime for many islanders, and comparative to other nations,
Guernsey has a high mean salary average, and where requirements are lower for job acceptance
as in multinational employ school leavers or finance industry employing with non-financial
backgrounds. It is recognised that high relative income per capita improves the standard of living
and sustains crime reduction, which could explain the safety and security in Guernsey (Anser et
al., 2020); however, other cultural norms are as important to consider.
Another respondent not only recognised the community aspect but further addressed the
opportunities on the island: “I think the island enables you to do anything. There is something
here for everyone, It's just a nice little community. There is a real community feel to Guernsey,
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which is different to the UK . The respondent continued:“So I look at what I would be doing in
Horsham on a particular day compared to what I'm doing in Guernsey. And Guernsey always
wins out and I'm definitely having a better quality of life being here”.
Interestingly, the potential of the island with ‘enabling’ was in line with Guernsey’s vision for
the future ‘our place in the world’ which was the ‘opportunity to achieve their potential’, in
this example the respondent working professional and finds the stresses are less when
comparing their lifestyles in Guernsey.
4.2.2 EVALUATION OF GUERNSEY’S TAX STATUS
In addition, the averaged scores can be further broken down by the job classifications, which
aides in showcasing perceptions by different socio-economic groups (e.g high or low earners) in
question 2, relating to benefit of Guernsey’s tax status, the high ranking job types were
respondents working in politics, averaging a score of 10, law also averaging 10, followed by
marketing and students (in education) averaging 8. It was not surprising that the first three job
types scored highly, due to the fact the disciplines shape and benefit from the financial and legal
landscape, whilst marketing is used to promote the island.
Figure 8: Job classified Responses on the benefit of Guernsey tax status
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Interestingly, students believed that the tax status was beneficial overall, slightly more compared
to the finance respondents. There is no direct explanation that can be given from those
respondents; however, it could be that the State does subsidise and provide grants for university
and provide free higher education facilities, in essence providing a well-valued experience for
students. The true cost of living and income is not realised until at a later stage.
The worst ranking scores were typically respondents in poor socio-economic statuses, such as
lower pay or required funding to survive, such as charities. Figure 8 showed that those in
education averaged a score of 5.5, medical averaged 5; and hospitality scored 5. The most
unusual response was the lowest-ranked property score of 3, which was surprising due to the fact
that landlords and property developers are typically high earners.
In one of the later questions relating to improvements on Guernsey, the property landlord
submitted a response that could help to clarify why the tax status is not overall beneficial for
such a high-income group.
Landlord: “The problem of living on a small island is that you're a captive audience, costs are
inflated; and I pay tax in the UK, and I pay tax in Guernsey overall. Building developments are
unfairly expensive, housing agent fees are more than in the UK.
High costs of living in Guernsey could be increased by fewer opportunities to purchase services
at inflated prices in the “captive audience”. When compared to the UK, the tax advantages are
minimal if the zero VAT costs are not used, and landlords, unlike corporations, do not see the
same advantage as the zero percent corporation tax. The margin of benefit or utility appears not
to be as large for this respondent regarding the amount of capital that is used in property
purchases. For example, high income on islands for technical construction speciality can also
lead to high cost for developers. In this case, high income in the described ‘captive audience'
could be a double-edged sword for essential services, as it can translate as high income for one
party but a high cost for another.
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One of the ex-deputies explained how the tax regime directly contributed to the cost of living
and support the marco state findings;
{the tax regime} “does impact those on the lowest incomes and I saw that when I was president
of [sic] very often we put up the price of cigarettes, we put up the price of alcohol”. The
respondent continued: “the increases would just eat away in your pension. If you've got a fixed
income, some of these duties can be very painful”.
In terms of improvements to the facilities and opportunities on Guernsey, respondents were more
in agreement on how they could make one meaningful change of life in Guernsey (see Appendix
E). The largest meaningful change was the need to improve transportation (7 out of 22
respondents), which related to having greater access to outbound flights, more destinations and
cheaper air and sea travel. Secondly, 3 out of 22 respondents wanted improvement in healthcare,
including improving waiting times, access to new treatments, cheaper insurance, and access to
more NHS sites in the UK. Thirdly, 3 out of 22 respondents wanted improvement in social
events, to meet new people and modernise and develop nightlife on Guernsey.
The questionnaire identified the cost of living as the primary barrier or detriment to a better
quality of life; during the interviews the specificness of the issue is explored further relating to
how the necessities have changed over time which involves the states responded needing to
change with a greater number of demand by islanders, as respondent 2 stated:
“I just think that the basics in Guernsey are extremely expensive, but it's also a lot of
circumstantial as well. There's a lot of single-parent families, and they do struggle. I think it's
not just the low earners, but I think property is probably the base of people's struggle because
that uses a lot of people's income”.
The respondent continued:
“But when I was younger, the basics for everybody was the basics. The basics for everybody now
includes an electronic device for school...The basics are becoming a lot wider and more
expensive”.
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The basics that States of Guernsey and Bristol university set out in the Poverty and Standard of
Living report (addressed in the literature review), limited the basics around food, shelter, savings
etc, but in more modern times there is a greater demand on technology and digital rights
especially during COVID-19. This has resulted in an increased cost for many islanders.
Inequality was also addressed, covering not only the inequality of income but also education
levels across the island which compared the facilities near the capital of St Peter Port and less
developed parishes such as St Sampsons, as respondent 1 stated. “there are an equal amount of
inequalities in Guernsey. You have people way below the poverty threshold but then you have
the added cost of housing
Finally, the research question has been supported by the tax regime’s impact on islanders and
evaluation of the tax status; however, the evaluation of Guernsey tax status has been close to the
challenges posed by the finance curse in terms of fostering inequality but did not mention other
lobbying issues, negative incentives. Although, some challenges related to SIDS or island
challenges and not the finance curse, such as infrastructure issues. However, the following
perception of sectors provides more indicative of the finance curse for non-finance sectors.
4.3 QUALITY PERCEPTION OF SECTORS
Compared to the life quality questions, there was more of an overall consensus from respondents
answering the quality of Guernsey sectors; (e.g. What sector/industry in Guernsey has mostly
benefited and least benefited from the offshore structure ?) (see table 4) Out of 23 responses,
Finance, Law and Hospitality were ranked most frequently in order. In contrast Agriculture,
Tourism, Retail, Health and Arts were ranked most frequently as benefiting the least from the
OFC. The ranking of agriculture as least benefiting is in line with the academic literature on
developing states that transitions from agricultural to financial sectors (Kakazu, 2014; Godfrey,
2008) followed by tourism and retail which could be explained by the impact of COVID-19, that
saw a high percent of closing retail shops and to an extent closure of inbound tourism.
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Table 4: Frequency of Ranked ordered responses by sector
Furthermore, the Arts industry was also in the list of least benefiting from the OFC; this may be
following the issues posed by the 'finance curse', in this case, having too excessive GDP in
Finance limits the growth of alternative sectors (mentioned in the literature review) (Shaxson &
Christensen, 2013). This suggests few jobs and economic opportunities for individuals to pursue,
such as in creative sectors theatre, fashion, literature modelling, fine arts and others.
4.4 PERCEPTION OF TAX REGIME
In addition to the experiences and the perception of quality of sectors, there is also an
understanding of not only tax terminology but the impact of the tax regime which has
contributed significantly to the following discussion points. In the question, ‘Explain what
Guernsey’s offshore financial structure means to you’? Overall, 40% of respondents believed
Guernsey to be a tax haven whilst 25% did not know; however when grouped responses by job
titles/ field of work 72% of the non-finance respondents believed it was a tax haven (see table 5).
This contrasted with the finance respondents’ view, where only 2 out of 8 (25%) believed this to
be the case (see Appendix F, for a breakdown of tax terms and job sectors). A non-statistical
observation noted that respondents who identified Guernsey as a tax haven also scored lower on
the quality of life and perception of sector questions, whilst those identified it as independent or
finance centre scored higher.
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Table 5: identified tax terms
The perception of ‘tax havens’ could still have negative connotations from the ‘name and
shame’ strategy that international organisations composed. The respondents' use of language
on the question could highlight the difference in perception .
One respondent working in finance viewed it more negatively and wrote: “ Largely as a Tax
Haven at present. it certainly is geared to benefit the wealthier rungs of society”. The use of
the word ‘rungs’ is more emotive language as it suggests a social ladder being imposed on the
work of other classes. In this case, the respondent scored 5 in question 1 (quality of life) and
scored 3 in question 2 (benefit of the tax status).
However, another respondent working in politics had a different perception and wrote:
“Guernsey is not a tax haven. It has incredibly high standards and very strict anti-money
laundering laws.” The respondent further explained the safety mechanisms in place; overall,
this respondent was explicit and had the intention to explain why Guernsey is not a tax haven
and promoted the island’s benefits instead of describing what the island is. In this case, the
respondent scored 9 in question 1 and 8 in question 2.
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Interestingly, students and other younger respondents were different compared to those that had
significant experience in their respective professional fields as uncertainty of the answer was
common, for example one 23 years old wrote, “not sure as I’m fairly ignorant to this topic”.
The responses appeared dependent on the individual's own interpretations; respondents who had
little knowledge of tax and financial regime, such as students, as only 1 out of 4 identified it as a
tax haven; however, most were unsure, based on what they heard or read. Those who had
worked in finance for a long period and were experienced largely viewed Guernsey as a tax
haven since the inception of the tax regime. Furthermore, the idea of Guernsey's label of tax
haven has mostly been identified from working respondents since it was identified as such at the
time.
For younger respondents their perception could be based on Guernsey’s legitimate transition
to a non tax haven status, as after years of negotiations, in 2019, the OECD reviewed the
blacklist and concluded, after reform and agreement, that Guernsey's tax regime is no longer
considered in the blacklist (States Of Guernsey, 2019). Guernsey was transitioned to a
whitelist, which means they incorporated fair and improved governance. The younger
respondents may have experienced the more changed and developed zero-ten regime in
recent years.
Furthermore, the narrative and presentation of the tax regime and OFC could impact
respondents perception from local media descriptions it is described and argued positively
(Guernsey press, 2009), in contrast to the representation from the outside world of Guernsey
as a mere tax haven (Palan, 2002; BBC News, 2018). As from government records, the
Policy & Resources Committee President from the States argued: The affirmation that our tax
regime is not harmful in the global economy is an important decision to help challenge
misconceptions about Guernsey (States Of Guernsey, 2019, p8). Younger respondents might
only see the new labelling and more developed side of the regime.
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However, the idea of a ‘spinning’ of positive narrative may have even further connotations, as
one resounding interview statement was expressed by a participant working in corporate
marketing on behalf on the state and private sector:
“I think there's there is kind of feel, a need to present the island as affluent and anyone with
issues from the lower end of the spectrum standpoint are kind of disregarded but perhaps even
actively pushed under the carpet because they don't want to perceive the islands in a certain
way”
There is a clear conflict between the different narratives and 'labelling' that might be at the cost
of tackling islanders' hidden social issues. One conjecture is that the States have to compensate
not just in the normal case of being physically small but overcome the negative international
narrative that attempts to name and shame the tax haven status. This is despite being de-classed
by the OECD as a tax haven, experienced respondents in finance continue to use the term.
Finally, the presentation of the island in international news would impact prospective clients
from either transferring capital or residing physically; there may be an imperative to accentuate
the positive narrative.
Finally, direct comments on the zero-ten tax regime were also noted in the interviews, especially
from a previous deputy, explaining how the regime could change in light of the current
difficulties; as respondent 5 stated :
“It will be interesting to see where they go in terms of the options that are available to them,
my that you could jump in my own view is I think there is I think the whole corporate
environment, corporate, international, corporate tax environment is quite different now in
2021 than it was in 2006 when that regime was designed”
However, interestingly the respondent continued to justify the conception as; “the zero-ten
was a necessary evil”.
The statement “necessary evil” reaffirmed directly with the research question; the necessity was
in developing the island into an attractive financial hub that developed the island as an
international player. The evil part refers to the costs that a drastic change in policy has on
tackling certain social dilemmas.
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These responses are recurring in both the primary and secondary findings, over time there has
been a development of the tax regime in terms of material change in increased scrutiny and
regulations. Respondents’ perception based on age groups and in some cases socio-economic
perceive the regime differently therefore the research question is explore by different islander’s
perception.
4.5 IMPACT OF COVID-9 AND BREXIT
Finally, in terms of external factors influencing the tax regime and its impact on Guernsey
citizens, responses overall believed that COVID-19 had made Guernsey more attractive
internationally and domestically, with 77.3% agreed compared to 13.6%. However, Brexit’s
impact on Guernsey was more uncertain; overall 45.5% didn't know and a smaller, 9.1% stated
“Yes”, whilst 16.2% stated “no” (see Appendix G.)
There were some conflicting arguments regarding the impact of COVID-19 on the attractiveness
of the island, as the question included both domestic and international results. Overall the
majority (77.3%) believed that it would be beneficial in attracting flighting corporations from
increased international taxation due to the high national costs of the pandemic. However,
respondents did not fully address the impact of COVID-19 on the domestic state's budget since
state income would have been reduced as the policy and resource committee already highlighted
the high budget deficits. Brexit, despite being more in long term discussion and analysis with
greater certainty than COVID-19, still left the majority of respondents unsure of the positive
impact for the island.
The disruption of COVID-19 is one front and centre issue which is having long-term future
implications for funding of the island and direct disruption to the lives of islanders. Some
socio-economic groups were more impacted than others but those who had access to stable
internet and access to technology performanced better, as respondent 3 stated: “The long-term
impact of that massive loss of educational input is one issue, another is mental health and
well-being. I think much of that could well take years to play out in terms of the effect on some
individuals in the community as a whole”.
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However, it was not only the health implications of COVID-19 but also the acceptance and
legitimacy of tax preferences if corporations are not substantive in helping islanders during the
hardship of the pandemic; as respondent 3 said: “The corporate offering here will only exist as
islanders allow it, if COVID-19 had a detrimental impact on living costs or business cutting
corners with workers to help ease Covid, islanders would certainly further change their
feelings”.
This highlights another recurring theme in the findings; there is a concern that the island's fiscal
response to external instability would continue to enact tax competitive regimes. Therefore, this
could lead to a vicious cycle of returning the regime's more basic structure and enduring the
same issues of state funding, lack of development as others impact that was seen in the literature
review. Therefore, the ripple effect of COVID-19 could highlight if the tax regime is not fit for
purpose and it could further divide the community’s perception and views on the topic.
5. RECOMMENDATIONS
From the discussion in the findings above, the recommendation can be condensed in the
following. Life qualities of islanders could be different in the future as the impact of the
evolving finance and tax regime could be more or less beneficial. An accurate cost-benefit of the
tax regime should be carried out to aid objective decision making and reduce opinion led policy.
This also calls for future research to help identify stages in the historical evolution and
development of tax havens.
Furthermore, in the consolidation recommendation, policymakers should include combining the
extensive reports and surveys of community, poverty and wellbeing surveys that are released at
times, quarterly to yearly and instead publish a more consolidated report, with higher quality
content. The overview in micro level data is quite advanced and detailed for the small island but
the extraction process and more general benchmarking is more difficult to calibrate and bring to
the front of policy objectives.
Finally, this research's evaluation of the tax regime with input from community members, is the
first for its kind on Guernsey; the state of Guernsey has not previously requested input from
island members to evaluate the overall tax regime of OFC status. Based on this future work and
development can be made on engaging with islander’s views on the benefit they gained from the
tax regime.
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6. LIMITATIONS
As the research was original in the design of the questionnaires and interviews, limitations can
be identified regarding the methodology. Firstly, the responses to the questionnaire could be
skewed significantly by certain groups in job sectors, as in some cases, participants were limited
by number; for example, there was only one respondent classed the property job sector. Their
ranked responses on the benefit/disadvantage of the tax regime could have dramatically changed
the results of the overall ranking and scores of job sectors; hence, it is difficult to generalise
results to job sectors when there are too few respondents for each job sector.
Furthermore, despite sampling a good selection of individuals working for financial firms, it
would have been beneficial to receive corporate responses from the public relations department
in the attempt to create a whole corporate view; as some respondents working for financial
institutions held different views from the traditional messaging of offshore corporations. In
terms of perception, it would have been useful during the interviews to have received more
responses on how financial institutions are integrated into society if financial institutions are part
of the core function of the island with the community being on the periphery or vice versa.
Due to the exploratory design of the research it would not be possible to use more advanced
statistical methods such as randomised sampling for the use of statistical analysis. Hence it was
recommended for future work to use large scale and less frequent engagement and surveying
with islanders to be able to more accurately generalise results. Overall, improvement in the
sample diversity and size is needed, as from a diversity perspective, there was only one
respondent from a non-white background, and only 4 out of 23 (17%) were aged 30 or below.
One of the main limitations and drawback of the research is the validation of the relation
between the zero-ten tax regime and quality of life. Not all challenges faced by islands have
direct causation by the zero-ten tax regime, some are mixed between internal inadequacy of
training within non financial sectors, in this, the finance curse would have been better explored
with the alternative sectors. Despite using various research methods to identify and quantify
challenges closely associated with the zero-ten tax regime, it is impossible to separate all of the
distinct issues. This in part, is due to the use of exploratory research, where results are not
conclusive in trying to identify cuaustions, and the research problem is relatively unexplored and
required greater clarity from the literature (Kalu, 2017).
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This is why the research question's main challenge was to accurately match the tax regime and
the qualities of Guernsey life to a complete degree. There were frequent attempts to relate
Guernsey's qualities and the tax regime for example; most respondents' response grants
economic and job attractiveness as positive indicators.
In the review of the questionnaire, there could have been the inclusion of expectation when
considering the islander's lived experience of the tax regime. The time component increases
reflectivity from the past and future ramifications, which aids in more significant contribution
from respondents (Puri & Wojciulik, 2008). In this case, the question could be composed as 'has
the tax regime performed as you expected?' 'Are the benefits from the tax regime as you
expected?' or in similar nature. There could have been more questions regarding interpretation;
however, too extensive questioning could reduce respondents' participation.
In terms of respondents' interpretation and reflection of the interview questions, criticisms are
more easily identifiable and recalled compared to identification of benefits to quality of life
which contributes to negative bias (Vaish et al., 2008). During the interview, more in-depth
descriptions of criticism and issues presented on Guernsey were more detailed than the positives.
For example, the benefits of the financial and economic security that the tax regime offers were
stated in short sentences as a matter of fact. However, the recall of criticisms and limitations
was better described and more engaged when discussing negative experience; hence, it is easier
to find criticism than positives. Furthermore, the interviews posed a difficult task for participants
as they were asked to place themselves in the shoes of different socioeconomic groups on
Guernsey.
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7. CONCLUSION
In conclusion, the overall quality of life is high in Guernsey; however, the tax regime's cost
impacts specific islanders more significantly than the benefits, which could be identified as a
potential Achilles heel to the tax regime and OFC. In addressing the research question, the
perception of the zero-ten financial regime appeared to benefit certain groups more than others;
those in finance, in the legal system or those interacting with financial mechanisms, benefited
the greatest. Those with lower incomes were not as supported by the tax regime, where
non-financial industries such as the creative sector are not as prominent on the island and are a
marginalised voice in evaluating zero-ten tax regime. This was further highlighted by the
financial constraint imposed by COVID-19 and the impact on supporting at-risk groups such as
charities; the budget deficit further compounded the problem. Finally, there was a change in the
tax haven image in terms of interpretation, as younger respondents did not have a distinct view
of the regime being a tax haven and was contributed by the evolving regime. Guernsey has
transitioned from the 'no alternative' tax perspective into leading and accepting new regime
requirements for the future vision of the island.
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9. APPENDICES
APPENDIX A: Billet VI, 1998 Tax response
“There seemed to be a general consensus amongst members that extra help should be given to
low income earners.. [but] the majority of members rejected the idea of tackling the problem
through (an increase of) income tax alone.” (States Of Guernsey, 1998)
APPENDIX B: Complete list of participants and length of interviews
●
●
●
●
●
●
●
Ex-Deputy of Treasury and policy and resource committee (length 40:33 minutes)
Ex-Deputy of Committee for Employment and Social Security and current head of Corporate
and Social Responsibility at a large multinational firm. (length 46: 30 minutes)
Political candidate in the 2020 deputy election and language teacher (length 28: 30 minutes)
Technical Trainee at a financial marketing firm (length 16:28 minutes)
Psychologist at a special needs facility (length 15:05 minutes)
Senior accountant at large international trust and bank (length 22:53 minutes)
Head of a public legal department (length 18:05 minutes)
Appendix C: Respondents’ residency status

APPENDIX D: State financial calculations
State revenue and inflation; 2003-2020
Tariff revenue and inflation; 2003-2020

APPENDIX E: Respondents meaningful change of life on Guernsey
Coded responses
Frequency of coded
responses
Improve affordable housing 2
Improve Education 1
Improve Environment 1
Improve family facilities 1
Improve Healthcare 3
Improve Progressiveness 2
Improve Retail options 1
Improve Social events 3
Improve Transport 7
Reduce Social conflicts 1
Grand Total 22
APPENDIX F: Breakdown of tax terms and job titles
Job title Tax term Number
Education Tax haven 3
Psychology Tax haven 1
Law Tax haven 1
Hospitality Tax haven 1
Hospitality Don't know 1
Property Don't know 1
Marketing
Specialist Finance
sector 1
Finance Tax haven 2
Finance Don't know 1
Finance Independent Island 2
Finance
Offshore Finance
centre 2
Finance Fiduciary Island 1
Other
Don't know
Politics Autonomous island 1
Medical Tax haven 1
Charity Don't know 1

APPENDIX G: Impact of Covid-19 and Brexit

APPENDIX H: Life On Guernsey Questionnaire