Guernsey Press

Income tax rate change 'not on'

GUERNSEY'S financial black hole cannot be filled by raising income tax because that would make the island uncompetitive.

Published

GUERNSEY'S financial black hole cannot be filled by raising income tax because that would make the island uncompetitive. Treasury and Resources minister Lyndon Trott said projected losses of '48m. could feasibly be made up by raising the standard rate from 20% to nearly 29%.

But it would be an unpopular move for the island's reputation in the offshore world.

He said that the key issue was 'head room' ' the scope the island had to raise taxes without seeming uncompetitive.

'If we look at other jurisdictions, we can raise the percentages and the ceiling for social security contributions without looking seriously out of kilter with the rest of the offshore world,' he said.

'If, however, we apply the same principle and seek to recover it all from income tax, we would need to raise the rate to 28% at a time when the trend is for 20% to be the absolute ceiling in many offshore jurisdictions. It's a perception issue.'

It has been argued that loading income tax would be a fairer and more open way of filling the black hole.

As the tax reform consultation process draws to a close this week, Deputy Trott said that he believed that islanders were now ready to accept that they would have to pay more to cover the revenue shortfall.

'The average man in the street now realises that it's impossible for him to avoid sharing some of the burden,' he said.

'But the details in the consultation document regarding percentages and threshold increases are not written in tablets of stone.'

He said the important principle was that the '35m. grant from general revenue to the social security fund should cease.

'How percentages impact on different earnings groups is a matter that will be carefully considered in the coming months.'

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