Le Sueur has set out alternatives to zero-rating in response to the proposals by Jersey Senators to zero-rate GST on food, books, newspapers and magazines and childrens' clothing.

"I am acutely aware of the strong feeling that, particularly against the background of improved tax revenues, we need to give something back to compensate those on low and middle incomes for the added cost burden of GST," Le Sueur said in a statement.

He continued:

"I have already recognised that in my Budget proposals in which I am proposing that Income Tax thresholds should be increased by 3% and Child Allowance by 20%."

"Having listened to members discussing these zero-rating Propositions I believe there is a wish to give something extra back to low and middle income households and I would support this. However I am concerned that the zero rate proposals would produce a very complex and costly GST system along the lines of the discredited UK VAT system."

"I believe a much more effective way of giving something back to people on low-to-middle incomes would be to further increase income tax thresholds and I am therefore now proposing that we should raise Income Tax thresholds by 6.5% instead of 3%."

"The zero-rate proposals would give most of the benefit to the well off, and would add significant complexity and cost to small businesses, the consumer and to taxpayers. In contrast, my proposal to increase income tax thresholds would focus the benefit on low to middle-income groups, would keep the tax as simple as possible and would involve no additional costs to anyone."

"With Senator Shenton and Deputy Lewis’ proposals GBP2.2m of the GBP3.4.m benefit from zero rating would go to high income households and only GBP1.2m to lower middle income households. Under my proposal to raise income tax thresholds the entire additional GBP3.7m benefit would go to those lower middle income households. The less well off remain fully protected by the enhancements to Income Support."

Le Sueur pointed out that the proposed exclusions would also increase the complexity of GST, and create significant costs for the government as well as businesses.

"For small businesses the added administration burden and cost would be considerable. Under the structure approved by the States, small businesses [those with a turnover below GBP300,000 a year] would not need to register for GST. Under zero-rate proposals, in order to compete with large businesses they would inevitably find they had to register and keep complex records which will be very costly in both time and money, at least some of which is likely to be passed on to the consumer," Le Sueur observed.

"In addition, it would cost the States an additional GBP800,000 in administrative costs and would involve employing an extra eight members of staff," he added.

"I believe my proposal is a far better means of giving something back to people on low-to-middle incomes. By increasing income tax thresholds by 6.5%, instead of the 3% proposed in this year’s budget, low to middle income households would be three times better off than they would from zero-rating food, books and newspapers," Le Sueur argued.

The Treasury and Resources Minister pledged that if the States reject the proposals for zero-rating, he would commit to bringing an amendment to this year’s budget to increase income tax thresholds by 6.5%, rather than the 3% currently in the budget.

The States of Jersey will introduce GST in Jersey in 2008 at a rate of 3%. It is estimated this will bring in GBP45 million to fund public services, covering a fiscal hole created by corporate tax reforms.