New Taxes On The Agenda In Guernsey

The Guernsey Press And Star

16 October 2003

This story is reproduced by kind permission of This Is Guernsey at http://www.thisisguernsey.com

Guernsey has not ruled out a sales tax to raise revenue lost by a switch to zero tax for businesses.

Jersey’s States has already announced new taxes to fill the £100m black hole it expects when zero tax is introduced in 2008. A sales tax of between 5 and 8% is likely in Jersey alongside a payroll tax of 1.5%, to be paid by employers and employees.

The Advisory and Finance Committee has consistently ruled out VAT, but has admitted that a sales tax could be on the agenda.

‘Nothing is ruled in or out,’ said A and F president Laurie Morgan.

‘Last year we said it was our aim and intention to keep the rate of personal tax at headline level and maintain public services and not introduce VAT, specifically meaning VAT, but not a sales tax, in future.

‘Until such time as we have a package of measures, we do not think it’s helpful to speculate.’

Deputy Morgan said he had no prior notice last week that Jersey’s Finance Committee was going to announce its new tax plans. He described it as a brave step.

‘Jersey came up with a framework and, to our surprise, they announced it, because we knew nothing about it until it was announced,’ said Deputy Morgan.

The Guernsey shortfall could be in the region of £50m. Last year, the States made an operating surplus of £48m. and A and F has warned that this is likely to disappear once most businesses are not paying tax. When the zero tax rate for businesses was announced at last year’s November Budget, A and F said ‘other taxation and revenue measures would be considered in consultation with local industry’.

Deputy Morgan said that was still the case and the corporate strategy group was working on options. But no announcement will be made yet.

‘Jersey has gone one step further and said that it’s a proposal for them. They have been brave enough to do that and they will seek public reaction.’

He said the people of Guernsey would also be asked for their reaction to any alternative means of raising revenue. ‘Of course we want feedback, but the government has to make the final decision.’

Deputy Morgan added that what would happen in Guernsey was likely to be ‘less dramatic’ than Jersey’s situation.

‘We are in revenue surplus [forecast £33m this year] and our economy is very strong and we are not having to introduce measures sooner rather than later.

‘We have more time and will have proposals next year, probably after the change of government structure. It would be a bit much for the old regime to commit the new regime to a tax strategy.’

Jersey Senator Philip Ozouf told Thursday’s Institute of Directors conference that he wanted an open, honest debate about other forms of tax. He said that he would not tell Guernsey politicians how to go about their business.

‘It’s possible to draw conclusions from what one island is doing versus the other,’ he said.

‘We have a different approach to our machinery of government and on tax. We are very keen to have an upfront debate with our community about the consequences of moving to a zero business tax rate. It’s extremely important that people know the consequences.’

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