Jersey Unveils Budget 2008

by Jason Gorringe, Tax-News.com, London

24 October 2007

The Jersey government on Tuesday published its 2008 budget, proposing increases in the thresholds at which income tax is paid, as well as a 20% increase in the tax allowances for children and students in higher education.

The Treasury and Resources Minister has also proposed raising the value of properties on which first time buyers pay reduced stamp duty to GBP300,000.

Treasury and Resources Minister, Senator Terry Le Sueur announced that:

”Our tax forecasts have improved because of our recent economic success. However this is not a reason to defer GST. We still need GST to meet the shortfall that will be caused by the move to zero-ten."

He continued:

”The increases in tax thresholds and allowances are designed to reduce the impact of GST on low and middle earners, particularly those with families. If approved, it will mean a working couple with 2 children (one at university), paying GBP7,500 in mortgage interest, can earn almost GBP40,000, before they start to pay any income tax."

“Meanwhile the rise in Stamp duty discount for first time buyers is intended to help people entering the property market.”

The Minister revealed that he is cautious about the improvement in tax revenues, and is proposing transferring GBP25m to the Stabilisation Fund. He explained that:

“Although this is a welcome boost, we must be prudent. We cannot assume that the economy will remain buoyant. There are, in particular, real concerns about the effect of the world wide credit crunch on the local finance industry.”

The transfer to the Stabilisation Fund is in accordance with the Fiscal Framework agreed last year. This involves saving surpluses in periods of real economic growth so that these funds can be invested to stimulate the economy in less buoyant times to improve economic stability, contain inflation and create the conditions for sustainable economic growth in the Island.

Budget proposals for 2008 focused on three main areas; income tax, impôts duty and stamp duty. Key measures included:

Income Tax

• 3% increase in tax exemption thresholds for both 2008 and 2009;
• 20% increase in child tax allowance for 2008, from GBP2,500 to GBP3,000 for each child as the basic allowance, and from GBP5,000 to GBP6,000 for each child at university or in further education;
• Greater market opportunities for new pension products; and
• The intention of offering electronic tax returns from 2009 was announced.

Impôts Duty Proposals

• Increase the duty on alcohol by 4% and tobacco duties by 4.5%, representing: 34 pence on a litre of spirits; 4 pence on a bottle of wine; 1 penny on a pint of ordinary beer; 13 pence on a packet of 20 cigarettes;
• Fuel Duty to increase by 4% on all road fuel by 1.6 pence a litre;
• To replace the current scheme of Vehicle Registration Duty (VRD) once the States decide on its preferred environmental alternative in early 2008.

Stamp Duty Proposals

• A new Share Transfer Property Tax was proposed, to go some way to resolving the inequity in the housing market;
• An increase in the ceiling at which first-time buyers receive a discount on their stamp duty from GBP250,000 to GBP300,000 was proposed; and
• The new Share Transfer Property Tax has been developed in response to a States decision in 2005 and is intended to increase the equity in the property market by introducing a tax equivalent to stamp duty for share transfer properties.

The Treasury Minister’s proposals will be debated by the States on 4 December 2007.

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