Guernsey Freezes Income Tax Allowances In 2006 Budget

by Jason Gorringe, Tax-News.com, London

19 December 2005

With the government facing a cash squeeze, the States of Guernsey has unanimously approved the island's budget for 2006, which will raise additional revenue through a freeze in personal income tax allowances and increases in alcohol and tobacco duties.

Key highlights of the budget include:

• Personal income tax allowances for 2007 to remain at 2006 levels.
• A 6.8% increase in the rate of duty on tobacco (RPI plus 3%).
• A 10% increase in the rate of duty on alcohol.
• No increase in the rates of other indirect taxes.
• 2006 Cash limits reduced by £6m compared to previous indications.
• No transfers to the Capital or Contingency Reserves.
• A transfer of £12.75m from the Capital Reserve to continue to fund the Les Nicolles Schools Project.
• A transfer from the Contingency Reserve of £5m to establish a Reorganisation & Restructuring Fund.

It was agreed there would be no change in petrol duty after an amendment by Deputy Peter Roffey was defeated.

Cash limits for States departments are being reduced by £6m on previous estimates, while spending on capital projects is being cut by £11m.

The Treasury and Resources Department stated in the Budget report that:

"In view of the present States financial position, the Department is recommending that the basic personal income tax allowances for 2007 remain at the same level as 2006.

"It is worth emphasising that in recent years personal income tax allowances have increased significantly in real terms."

Recommended