MercoPress. South Atlantic News Agency

Changes to Falkland Islands tax regime

Cllr Dr. Clausen said they were studying some modifications in the tax law

In her summary of the September 13th meeting of the Falkland Islands Executive Council, given today on the Falkland Islands Radio Service, Councillor Dr.Andrea Clausen said that some possible changes to the Falkland Islands tax regime had been discussed in the light of the Fisheries Legislation introduced in 2005.

This legislation provides property rights access into the Falkland Islands Fishery in the form of an Individual Transferable Quota (ITQ). In recognition of the fact that ITQ was an asset, which could enhance the value of a company, as that company now had a right to catch entitlement and purchase of licences, Cllr. Clausen said that legislation had been enacted so that the sale of ITQ from one company to another could be regarded as "a revenue receipt and cost". However it was recognised that the value of the ITQ could also be converted to cash by disposal of shares in the company holding it. Because the Falklands does not have Capital Gains tax this profit would not have been taxable. Therefore, legislation was introduced to bring the disposal of shares into the capital gains rules. The calculated profit or loss relating to ITQ arising from the disposal of the shares was to be added to the individual's other income for that year. Dr. Clausen said that it had now become clear that in certain circumstances a profit would be taxed where no cash has been received for the ITQ, as in a gift or retirement situation from a family company. Further, it had been found that the cost of establishing any profit made could outweigh the tax on that profit. In the light of these discoveries, Executive Council had approved a policy to amend the Taxes Ordinance to defer or eliminate the charge to tax on the disposal of ITQ in certain circumstances. A number of amendments had been proposed which would now be discussed with members of the fishing industry before amendments to the Taxes Ordinance were drafted. John Fowler (MercoPress) Stanley