Tuesday, 24 November 2009

Luxury Yachts - A Local Loophole in GST?

CHANGES have been made to GST rules to encourage more super yachts to berth in the Island. It has been agreed that yachts owned by non-residents should be allowed to stay in the Island for an extra six months without incurring the three per cent tax. Until now, yachts owned by non-residents could stay in Jersey ports for up to a year without GST being charged. That time has been extended to 18 months. The new rules also allow the 18-month time period to restart if the yacht leaves Jersey waters for a period of longer than 14 days before returning.(1)

The subject of large yachts has come up in the States several times, and Phil Rondel, the Deputy of St John, highlighted the benefits of these to the economy:

We have seen this last week down at the docks with the Harbours bringing in their new policy on allowing super yachts to come here with the owners. We are talking about mega money here and they will be spending large sums of money, we are talking in the millions, on investing in the Island basically because they will be carrying out their victualling, their fuel, their bunkering, their purchasing of goods for keeping their vessel in good order. The vessel that came in this week alone will be spending approximately £1 million-plus on maintenance of that vessel, 10 per cent of the value of the vessel, and the more business like that we can attract the better for this Island.(2)

On the adverse side, these large yachts are also bringing a share of pollution, and it does not seem right that the Islanders should subsidise this for the benefit of the increased trade. The yachts must pay their way, and surely learn that they cannot pollute without incurring some penalty in the form of environmental taxes. As Connétable G.F. Butcher of St. John noted:

At sea on a calm day, on a summer's day... you can see the pollution out there and that is caused by large luxury yachts; not motorcars, large luxury yachts. I think if you are going to bring in an environmental tax it should be much wider based than is being done.(3)

The lack of GST on marine fuel suggests that this is unlikely to come about, and when it comes to balancing fairness (that the polluter should pay) against the economy (but if they do, maybe they will go away and we'll lose money), it looks as if ethical considerations go out of the window for the sake of short term profit.

Of course the main change to the law noted in the news story is that it makes it wonderfully easy for Jersey residents with large and expensive yachts to avoid paying GST on the same. For what happens if Jersey residents have yachts owned by Guernsey companies (or companies in other jurisdictions, or via trusts), and - for the purposes of the law - registered elsewhere? They will not then be liable for Jersey GST unless they are here continuously.

Yet now all they have to do is berth in Guernsey or elsewhere for a mere 15 days and return, and they have another 18 months without needed to be subject to GST as an import into Jersey. That is really just a short holiday away, and hardly constitutes hardship.

Is there any way to prevent this loophole? I'd be interested in knowing if there was.

(1) http://www.thisisjersey.com/2009/11/23/gst-changes-to-lure-super-yachts/
(2) http://www.statesassembly.gov.je/documents/hansard/17721-1217.htm
(3) http://www.statesassembly.gov.je/documents/hansard/40202-29087-22122008.htm
(4) http://www.statesassembly.gov.je/documents/hansard/3721-32279-2972009.htm

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