Policy & Resources Committee comment following discussions with Deputy St Pier and Deputy Soulsby on Tax Review amendments

Tuesday, 14 February 2023

Following meetings last week, the Policy & Resources Committee met again yesterday afternoon with Deputy St Pier and Deputy Soulsby to discuss a further amendment to the Tax Review proposals.  These meetings were instigated by the Committee as part of their efforts to engage with all States Members and this was the third meeting held between Committee members and the two deputies since the first part of the Tax Review debate.

The Policy & Resources members have sought to provide States Members with viable alternatives to its original package of measures (Option A) when debate on the Tax Review resumes on 15 February, and has welcomed engagement from all members.  To this end, it had hoped to work with Deputies St Pier and Soulsby to develop an amendment which they intend to lead into a viable ‘Option D’.

However following yesterday’s meeting the Committee is clear that Option D is not a credible option.  The other options that will be put before States Members are all packages totalling £85m, which is needed to address the forecast annual funding shortfall, which government cannot responsibly leave unaddressed.  What would be achieved through Deputy St Pier and Deputy Soulsby’s latest plan amounts to half this figure and would therefore leave the States with a major ongoing annual deficit.  The Committee is very concerned that such an amendment will be superficially appealing and masks the reality that it fails to address the problem of meeting a growing demand in health care costs, pensions and other essential services that thousands of Islanders rely on.

The Committee looks forward to the debate this week, where it hopes all options, including Option D, can be fully challenged and scrutinised before the States makes its decision.

The Committee remains of the view that Option A is the best way to deliver a more progressive tax system that reduces the burden for those on lower incomes, while protecting Guernsey’s competitiveness and raising sufficient revenues to meet the growing demand for essential services like health care and pensions.

Option A includes a 5% Goods and Services Tax to raise additional revenue, but as part of a package of measures, it will largely be higher earners and businesses who shoulder the increased tax burden, along with others who contribute nothing currently, such as visitors to the Island.  This is because the package also includes:

A new, lower income tax band of 15% on income up £30,000

An increase in the personal tax allowance of £600

The introduction of allowances for everyone on social security contributions

Increases in pensions and benefits, and new support for low-income households outside of the benefits system

Further investigations to raise up to £20m more through corporate tax reforms

£10m of savings in public spending

This option was developed following two years of examining a range of alternatives, independent analysis by leading tax experts, all included in a detailed and thorough Policy Letter.