Jersey's Council Of Ministers Announces Plans To Impose Zero GST Rate On Food

by Jason Gorringe, Tax-News.com, London

25 August 2008

Jersey's Council of Ministers has announced a package of tax measures designed to dampen the impact on Jersey residents of recent increases in food and fuel costs.

The package unveiled on Friday includes:

• Zero rating GST on food;
• Increasing winter fuel payments by 20%;
• Freezing fuel excise duty in the budget;
• Maintaining the current rates of income support, including the allowance for GST on food, and the scheme for people who do not receive income support but are below the tax threshold. This means that the full benefit of GST reductions on food will be passed on to people on lower incomes who have already received support to cover those costs;
• Deferring from January 2009 until October 2009 any reductions in income support for people who receive transitional relief;
• Introducing a programme of home insulation grants and energy efficiency advice to help the public to reduce their fuel bills; and
• Accelerating the programme of insulation for States Housing to help States tenants reduce their fuel costs.

In a statement, the Jersey authorities revealed that:

"Deputy Labey (Carolyn Labey, Assistant Minister in the Education, Sport and Culture Department) has lodged a Proposition to zero rate GST on food and domestic fuel. The Council of Ministers will be supporting the proposal on food, but opposing it on domestic fuel. Zero rating domestic fuel would have most benefit for people with large houses and swimming pools, but would have much less effect for people who already cannot afford to properly heat their homes. The Council’s intention is to increase winter fuel allowance and invest in home insulation and energy efficiency. This will directly help those who are least able to afford heating and will also have an environmental benefit."

They continued:

"The Council of Ministers have always opposed zero rating of food because they wanted a low flat rate of tax that was as simple as possible to administer. This aim remains as relevant today as it has always been. However there has to be a response to the unprecedented increase in food prices and removing GST on food will have a direct effect on costs for everyone."

"It has also now been possible to update the estimate of GST income based on the first quarter of operation. The initial estimate is that the annual income from GST could be about GBP50mn, which is GBP5mn more than the target. Ministers have always maintained that they will only raise the taxes that are required and as there is now no need to charge GST on food it makes sense to remove it."

The proposed changes will be presented to the States as amendments to the Business Plan with any changes necessary in the Budget. It is expected that they will become effective from January, with GST changes following in spring next year.

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