Guernsey tax package to raise more States income but protect low earners

GST at 3% combined with benefits and States savings will bring in 59M a year.

Policy and Resources lead, Deputy Lindsay de Sausmarez, says they inherited a resolution from the previous States of implementing GST at 5%, but she says that had cost of living implications:

"We were a bit worried about the inflationary impact - the way it might increase the cost of living - so we wanted to really soften the impact and that’s one of the main reasons we've reduced the headline rate of GST from 5% to 3%, essentially to give it a softer landing."

Business pays 41% of the consumption tax but Deputy de Sausmarez says they have consulted extensively with the sector:

"That’s why we’ve changed some of the details around the Social Security contributions. We have been concerned about the cost of employing people in the island, we know we’re already an expensive place for that.

"We've been making sure that businesses are not overly impacted by this and it is really manageable, and we’ve been working to incorporate their feedback.

"They were worried about the extent of change and they were worried about the pace of change, and we’ve changed both of those things to accommodate these concerns."

The problems with a tax backlog at Revenue Services are well-publicised, and Deputy de Sausmarez says more pressure on the department has been considered:

"This was obviously a key concern of ours as well, given the current troubles, but actually, in terms of a new GST, it’s quite straightforward from an administrative point of view, compared with many other changes that we could make.

"We have simplified the Social Security contribution side of things which is actually the more complex bit, and we are well into our recovery plan for Revenue Services. So that is a legitimate concern, but it’s one we're confident we can manage."

In a series of give and take measures, designed to cushion the less well off, duty on fuel will reduce by a quarter to bring it roughly in line with Jersey's rate, but vehicles will pay motor tax again. As a guideline the average cost will be £132 a year.

Transport tax changes are forecast to bring in £7M a year, corporate tax changes £6M and increased social security contributions around £2M.

The package is designed to be flexible should windfall finance taxes improve States' finances.

Deputies will debate the measures in July.