Jersey 2007 Budget Unveiled

by Jason Gorringe, Tax-News.com, London

25 October 2006

Senator Terry La Sueur on Tuesday delivered his first Budget as Jersey's Treasury and Resources Minister.

He announced that:

"The new procedures require that the Budget only considers measures for taxation and borrowing, and any proposals for transfers to or from the Strategic Reserve. All decisions on expenditure allocations were taken in the Annual Business Plan debate in September, and it remains for me to take account of those decisions and the revised financial forecasts when presenting the tax and funding proposals in this Budget."

Senator La Sueur continued:

"This Budget includes a further phase in the implementation of the Fiscal Strategy with the confirmation of the proposals to withdraw tax allowances from higher earners (20% Means 20%), together with the associated amendments to the Income Tax Law."

"I am pleased to say that the Budget also includes proposals to transfer GBP10 million to the Strategic Reserve, the first transfer for five years, and the Budget also includes draft proposals for a new fiscal framework. This new framework includes proposals for a Stabilisation Fund, as agreed in the States Strategic Plan, and I am presenting a separate proposition alongside the Budget Statement which will enable this Fund to be established."

Key income tax proposals contained in the 2007 Budget included:

• In accordance with the States decision in July 2006, the agreed proposals to withdraw tax allowances for high earners (20% Means 20%) are brought forward together with the necessary amendments to the Income Tax Law in respect of:
  - The phased withdrawal of allowances over a five-year period beginning with year of assessment 2007 through to 2011;
  - An increase in exemption thresholds of 2.5% p.a. for three years beginning with year of assessment 2007.
• Tax exemptions and allowances are frozen for year of assessment 2006 (estimated to generate additional tax revenues of about GBP3 million in 2007).

In addition to these measures, the Minister will also pursue the following measures in 2007 in furtherance of the agreed Fiscal Strategy:

• Goods and Services Tax;
• The 0/10% corporate tax structure and related provisions, including ongoing debate with the UK / EU to ensure continuing co-operation with the EU Code of Conduct on Business Taxation; and
• High level options for environmental taxes.

The Minister’s impôts duty proposals are to:

• Increase alcohol and tobacco duties at or above the level of inflation, which is in accordance with the Alcohol and Tobacco Strategies representing:
  - 29 pence on a litre of spirits;
  - 3 pence on a bottle of wine;
  - 1 penny on a pint of ordinary beer; and
  - 13 pence on a packet of 20 cigarettes.
• Increase to 50% the rebate of duty for small breweries, to encourage local producers;
• In respect of Fuel Duty and Vehicle Registration Duty:
  - Increase duty on all road fuel by just over 1 penny a litre; and
  - Maintain the underlying rates of Vehicle Registration Duty.

The Minister’s main proposals for stamp duty are:

• To maintain the existing stamp duty rates on property purchases;
• To introduce further anti-avoidance measures in respect of:
  - First-time buyer entitlement;
  - Clarification of “net value” in relation to property; and
  - Provisions for re-financing existing borrowing.
• To introduce provisions for fees required for Planning Appeals.

In addition to these measures the Minister will also progress the project to look at a tax or stamp duty on share transfer property transactions. The objective is that proposals will be produced in advance of next year’s budget.

The full text of Jersey's 2007 Budget can be found in the Tax News Resources section.

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