States Member Seeks Jersey Tax Hike

by Amanda Banks, Tax-News.com, London

17 February 2011

Geoffrey Peter Southern, a Deputy in Jersey's States Assembly, has lodged a Proposition advocating the adoption of a progressive personal income tax regime to replace the flat 20% tax rate in place at present. The retention of the 20% rate in the recent budget was heralded as considerable opposition emerged against eliminating the incentive, which has historically served the territory in drawing skilled workers and high-net-worth individuals (HNWIs) under the island's tax net.

The Proposition asks the island's legislative assembly, the States, to support "the principle of progressive taxation through the introduction of higher rates on personal income tax for those individuals with higher incomes and, in order to achieve this objective, to request the Minister for Treasury and Resources, Phillip Ozouf to bring forward the approval of the necessary as part of the Budget 2012 proposals." Southern proposes that legislation be enacted:

• To introduce a higher rate of personal income tax on annual income in the band GBP70,000 to GBP99,999 and to set the rate for this band at 22.5% for the year of assessment 2012 with that rate being raised to 25% for the year of assessment 2013 and ensuing years; and,
• To introduce a further rate of personal income tax on annual income over GBP100,000 and to set the rate for this band at 25% for the year of assessment 2012, with that rate being raised to 30% for the year of assessment 2013 and ensuing years;
• Meanwhile, Southern urged that any change must ensure that personal income tax assessments apply to an individual's earnings so that married couples are not discriminated against in the application of higher rates.

On the taxation of HNWIs residing in Jersey under the 1(1)(k) regime, Minister Southern has proposed an increase to the rate of taxation these individuals pay on their worldwide income, in line with the other proposed increases.

Currently HNWIs under the 1(1)(k) initiative pay a rate of 20% on the first GBP1m of worldwide income, 10% on the next GBP500,000, and 1% on income thereafter. In December 2010 Treasury Minister Ozouf announced that the government would increase the minimum tax payable by new applicants to the regime to GBP125,000 per annum, from GBP100,000, but announced plans - not yet implemented - to revise the rates applicable to 1(1)(k) taxpayers' income, to a 20% rate on the first GBP625,000, and a 1% rate on other income thereafter; an effort to increase the number of HNWIs applying for 1(1)(k) tax residency in Jersey.

Minister Southern has instead argued that Jersey would be better-served by an increase in the rate applicable to HNWIs' income to 25% in the year of assessment 2012, and to 30% in the year of assessment 2013, but did not prescribe at what threshold the 1% rate should kick in.

"I believe that we have to consider progressive taxation measures to solve our long-term problems in generating sufficient revenue to meet our needs. They will not be the only solution, but they must form part of the solution. In the short-term, I believe we cannot continue to increase the burden on those who are less well-off at the expense of the better-off. We have been told repeatedly by the Minister for Treasury and Resources that we must all be prepared to shoulder the extra fiscal burden which is required if we are to emerge from the deficit we are in. And yet, at the time of writing, we have largely seen only regressive measures with little attempt to properly spread the burden to the real high-earners in our community," Southern says in his proposition. He added:

"This proposition is clearly an attempt to more fairly spread the tax burden to those in our community who are genuinely better-off, through the introduction of higher rates of tax for high-income earners."

"This measure will increase income tax revenue by around GBP30m in a full financial year as detailed above. The introduction of a higher rate of tax will require some law drafting time and some time to rewrite the income tax computer program, but makes no long-term demands on additional manpower."

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