Ozouf Sheds Light On 2010 Jersey Budget

by Amanda Banks, Tax-News.com, London

29 October 2009

Jersey Treasury Minister Philip Ozouf has outlined proposals for his maiden budget, although he has pledged not to hit islanders with any new taxes.

Senator Ozouf announced that: “I am presenting the Draft 2010 Budget against a backdrop of the worst global economic downturn for 60 years. Jersey was well prepared for the economic turmoil, and took prompt action. The Fiscal Stimulus and Business Plan are now helping to get people back into work quickly, and are supporting businesses and islanders. We are also making significant investment in front line services, but we need to prepare for the future.”

He continued: “I recognize that 2010 will be a difficult year for islanders. I am not proposing any tax changes except for impôts duties In fact many lower income families will benefit in 2010 from the 5% increase in income tax exemption limits agreed last year.”

“As part of the 2010 Business Plan, the States agreed to spend more on health. I am proposing to pay for this by increasing duties on alcohol and tobacco. I have listened to the Health and Home Affairs Ministers, who are both concerned about the effects of alcohol on our society. It is therefore appropriate to raise extra funds by increasing the duty on alcohol and continuing the policy of discouraging tobacco use. I am also proposing an increase in fuel duty to pay for environmental initiatives.”

The key features of the 2010 draft budget are:

Income tax proposals:

  • Income tax exemption limits will be maintained at current levels;
  • Articles 115(g) and 115 (ga) will be abolished, removing tax breaks for UK Superannuation Funds as a first step in the 'Blampied' proposals;
  • 0/10% provisions within the Income Tax (Jersey) Law 200- will be revised to close loopholes and improve interpretations.

Impôts Duty proposals:

  • Alcohol and tobacco duty will be increased to recover GBP0.7m and GBP0.9m respectively, equivalent to the GBP1.6m additional funding allocated to Health and Social Services in the 2010 Business Plan;
  • Tax and duty rates on tobacco will be aligned with those in the UK over a three to four year period;
  • A tax on car purchases will be re-introduced. A low level Vehicle Emissions Duty (VED) is proposed, with similar exemptions and discounts to the previous Vehicle Registration Duty. This would be introduced from September 2010, raising GBP0.5m in 2010 and GBP2m in a full year;
  • Fuel duty will be increased by GBP0.04 pence per litre, including GBP0.03 to provide funding for environmental initiatives ahead of the proposed introduction of the VED from September 2010.

Goods and Services Tax proposals:

  • The GST exemption will be extended to higher education;
  • Anti-avoidance measures will be strengthened.

Concluding, Ozouf observed that: “There is a real risk that the downturn will open up a structural deficit in States finances because the tax base will shrink and take many years to recover, while spending continues to rise in real terms. The latest forecasts for this budget show the deficit risk is in the region of GBP40-50m."

“I am determined to correct the deficit forecast for 2011 before it materializes. I hope the Comprehensive Spending Review and Fiscal Strategy Review will identify ways to help me achieve this. I am proposing this budget as the way forward for Jersey, and as the best means of tackling the challenges ahead.”

The Draft 2010 Budget will be debated by the States on December 8.

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