'A struggle' to bring in GST

A GOODS and services tax is very unpopular with the public and would therefore be a ‘struggle’ to introduce, the Treasury and Resources minister has said.

A GOODS and services tax is very unpopular with the public and would therefore be a ‘struggle’ to introduce, the Treasury and Resources minister has said.

Gavin St Pier, pictured, made his comments after a wide-ranging consultation showed respondents’ dislike for reducing the general rate of income tax while introducing GST.

‘I think what the consultation tells us is that to introduce GST would not be popular and so it would be a struggle,’ he said.

GST was the least favoured option in two questions asked in the personal tax, benefit and pensions consultation.

Comments for: "'A struggle' to bring in GST"

Deputy David De Lisle

WE must remain competitive. Not having GST gives us the edge on competitors such as Jersey. We must do more with less. I have called repeatedly in the Assembly for the States to cut spending and implement robust financial controls. Any further taxation is not on when job loses are appearing daily in the news media. A goods and services tax would impact negatively on lower income earners, pensioners and those on fixed incomes --all desperately trying to keep up. The Treasury Minister has to keep in mind that the introduction of zero 10 corporate tax policy has hit Guernsey residents hard since 2008 as nearly 80% of everything government spends is taken from individuals through personal taxation-up from 60% before.

Enough is enough! Deputy David De Lisle

Public Services need funding

Any tax change will impact negatively on one or more group in the community. Government has to balance the competing interests of all groups in the wider interests of ensuring a strong economy and must not be derailed by any one group being disproportionately favoured.

If we want public services then they must funded. Benefits, legal aid, healthcare costs often increase in times of less economic growth. So the funding cost goes up.

Either some other service has to go or some tax goes up. There is only so much one can do in reality with so called efficiency savings. They sound so attractive, but they may be quite elusive because the reality is there is not as much waste as some think there is in public spending in Guernsey.

I think we have to work out IF we need more tax income to fund public services. If we do, then we have to model the impacts on different scenarios for collecting it.

E.g. GST plus increased personal allowance (take more low earners out of the income tax net). Or maybe no GST but increase income tax. Or whatever.

We really do need to model objectively what is likely to happen under each possible scenario.

Outcomes are sometimes counter-intuitive.

In trying to help lower earners we might end up inadvertently hurting them more, such as tax changes that cause 'wealthy' business owners / businesses to leave Guernsey and then we find more people (including low earners) unemployed.

Whatever we do it should be very well modelled, very well thought through and we should not let vociferous single issue groups knock off course what is a good plan for Guernsey overall.

I do not know what the 'good plan' is, but it must support a healthy, sustainably growing economy as at the end of the day it is the economy that pays for all public services - it leads to jobs, less burden on the taxpayer to support for example the out-of-work and of course increases tax take simply by GDP being larger (all other things being equal, without a single tax rise).

Whatever the right plan is, it should not be compromised because it would be a 'struggle' to introduce.

The right thing must be explained and then introduced.

If we avoid struggles we will probably end up all worse off in the long run.

Equally though we do not want poorly thought through counterproductive plans forced through either.

This is a really complex issue and I hope that sense will not be drowned out by a vociferous few pursuing single issues paralysing the ability of the States to do the right thing for Guernsey and all its community.

Pete

well said David. Now you need to rally the like minded Deputies to see GST never sees light of day.

Jon

Bloody common sense! What a waste of money this consultation has been, nobody wants increases in any form of tax, plain and simple. Taking money away from the public in a form of taxation isn't good for the economy. I'm sure all these civil servants writing up reports could easily be made redundant.

kevin

Of course we don't want GST or any other form of extra taxation but do we have any other choice?

Let's face facts - the States are unable/unwilling to cut expenditure by a worthwhile amount so I think it is inevitable in one form or another.

Martino

Yes, there IS an alternative. We must CUT our cloth accordingly, which is something we have been unable to do so far with any great success.

Reality

Reality is that we have a lower tax take (as a proportion of GDP) in Guernsey compared to most other countries.

And yet we want decent public services (compared to countries with higher tax takes).

If we cut the cloth accordingly we may have to give up real services that many need / want.

Things like education and healthcare may be compromised by cost cutting.

This can be counterproductive by storing up even greater long-term costs which just come back to bite later.

Cost cutting maintenance budgets can lead to earlier replacement of expensive assets - usually this is not good value for money - it just pushes extra cost on to the next generation that somebody before them enjoyed.

It is easy to assume that from the existing tax take we should just cut out all the fat and it will plug the deficit and meet all the increasing burdens on the public purse.

Problem is there is not as much fat as people think and the fundamental issue is that we want of lot of service / high standards but we only collect low taxes.

The circle probably needs to be squared by a continuous drive for genuine efficiency (not arbitrary cost cutting) plus some well thought through tax increases.

The art is in finding the right mix of taxes (existing ones adjusted or some new tax) that promotes the economy, attracts investment, and which provides enough income to allow public services to be funded and government to function properly.

I.Le Page

GST would push the unemployment rate sky high,just look at Jersey!

crapaud

It's the uncontrolled immigration plus our socialist inspired 'benefits' system that are the cause of our mass unemployment, not GST.

Pete

The only winners will be the gov. if this retail fatal tax is brought in it will never decrease but increase. It is GST = VAT = INFLATION = kill off any chance our high street shops have of surviving, competing with the internet. This is regardless of imposing higher GST on goods brought over the internet and regardless of exemptions given to some goods.

This tax has been on the back burner for the past three successive governments. I am sure if this tax is brought in during the life of this States, it will prove to be political suicide for some but the saviour of others.

soph

Struggle on SOG

Got the idea yet?

Rustylink

T&R must decide if it is in favor of good government or following public opinion. If the States wish to continue spending it must raise taxes and revenues, otherwise the government must reduce spending whether described as 'capital' or current expenditure.

Attempting to Weasel out of the dilemma by guaranteeing agency/company loans and leases will merely make the long term problems even worse.

My advice To Deputies and the Policy Council and Deputies is to grow up and take the necessary decisions and make serious cuts in wasteful spending without further temporizing and live with the consequences.

The financial consequences of making erroneous decisions are so serious, in the present situation, that consulting the public is a distraction rather than a contribution to the decision-making process. And an unscientifically balanced sampling of public opinion is, frankly, worse than useless.

A dash of reality

Agreed Rustylink

Posts on this and related story seem to form a consensus so far that the results of the tax consultation are useless because:

# Too few responses

# Respondents not a representative sample of the community

Hopefully there is some real value-adding work going on in T&R - modelling, scenario testing, etc etc.

Even if the consultation had more participants and was reasonably representative, doing something based on 'popularity' in the complex field of taxation - which touches on so many aspects of the economy and society - is not necessarily a wise thing.

The simple facts on (a consultation on) taxation are, in my view:

Most people:

(1) want to pay less tax

(2) want no less public service / or want more

(3) want other groups in the community to get less benefit / pay more tax (but not themselves)

(4) cannot possibly work out all the economic consequences of any particular set of possible tax changes - because it requires complex models and multi-disciplinary professional expertise to do so comprehensively and accurately.

As such, a consultation is of questionable value - the answers you get depend largely on which group(s) mobilise most effectively to respond to the consultation.

Island Wide Voting

It's pretty obvious that 'public consultations' are now in vogue,no matter how pointless they turn out to be, because of the furore over the wasted millions paid to outside professional consultants during the times of plenty

Yes multi-million pound projects such as the airport required outside assistance but it seemed at one time in the not too distant past that deciding on for instance extending the ormering season could not be contemplated without a £15K report from some oik just out of University with a 2.2 in Media Studies

Perhaps we are now drifting too far the other way.Wouldn't it be nice if our army of Civil Servants and politicians could actually be seen to make positive and measurable progress at each monthly States meeting by debating a subject clearly and concisely without half a dozen 'fag packet' amendments,and invariably ending with the standard phrase 'we hope to be in a position to report back within a year'

Sorry I'm starting to ramble now but the message to the States must surely be if you want to continue to represent Guernsey PLC stop pussyfooting around,realise that you're supposed to be in power,get things decided rather than constantly shoving them into the long grass

Martino

Yes, well said.

Frank

Good posts here.

Are we not getting closer to GST if civil servants don't give up their generous pensions? I suppose civil servants or their union will defend their pensions whatever happens with GST. So that's about 5000 against the rest of the population.

Red Herring

Wouldn't it be convenient if the structural deficit was caused by the pension element of the total remuneration package for public sector staff?!

The structural deficit stems from zero ten.

A war chest was built up by the States substantially assisted by the several years that the States took a partial employer pension contribution holiday.

The war chest is now being drawn on to fund the zero 10 tax drop.

So, (much of) the public pension fund deficit is directly attributable to the holiday and that money is compensating for the reduced income from corporate taxation.

So, a transfer has gone from the public to the private sector. And some of those private sector beneficiaries now look at the public sector pension and want it closed because of the deficit.

Quite ironic.

Anyhow, just because no coverage is given to this, it does not mean that the final salary pension scheme is not alive and well in Guernsey private sector.

There may not be many new entrants to final salary schemes, but there are plenty of private schemes with existing contributing members.

The proposed pension changes we saw from Alastair Langlois and co at the end of 2012 would overnight transfer all public sector workers onto a non-final salary scheme.

This would be nothing less than a reduction in total compensation - a pay cut.

If there really is a an affordability / economic issue driving the pension change then the employer could have closed the scheme to NEW members at any time.

That way, anyone externally applying for a public sector job would NEVER become a member of the final salary scheme.

That is fair to everyone - if the applicant does not like the new total comp package (with a worse pension element) then they do not have to take the job.

But those that have the current pension as an integral part of their employment contract (being nothing more than deferred salary), do not have their employer unilaterally interfering with their remuneration package.

Other posts on this week's stories on Education highlight in some places how important quality of teaching is.

You try and recruit / retain a full complement of decent teachers in Guernsey if the pension is reduced in the way Minister Langlois proposed.

Whether you are a local or from the UK, as a teacher in the UK you have far superior career progression prospects to here, earn the same (or more) and cost of living is way lower in most UK areas.

The reduction in total remuneration package from proposed pension changes could be the nail in the coffin in terms of keeping our locally born / trained teachers or enticing those from the UK that we need to populate our schools with great teachers.

We should not think that everyone is queuing up to come and live and work in Guernsey. It is quite hard to recruit talent into the gaps we have. We should not make those gaps bigger.

We need to properly fund our public services. Maybe some services we currently have could go, but we need to work out the true cost of doing that too (sometimes such savings are a false economy).

That may mean a mix of genuine efficiency savings and some tax increases.

If we duck the big issues the problems do not go away - they just come back and bite harder a bit later. Bashing the public sector is not the solution. We need good motivated staff in all parts of our economy for it to be a success.

kevin

Whilst there is little doubt that public sector pensions, pay and staffing. need to change this is only a small part of the big picture - the public sector is an easy target whilst it is easy to overlook the millions of pounds of tax take lost through the zero-ten scheme.

Those earning very high salaries in the private sector (usually in finance)should be paying a higher rate of income tax as it is that same tax take that has been lost in order to help safeguard their jobs.

JC

GST would be a mistake, and it would be a tax that would never go away. I think we all realise that Guernsey is in a state of decline, in terms of money in. However the Government has not accepted this and cut costs / made it clear to the public what we would need to lose to balance out. It seems clear to me we will see tax increases soon, leading to people moving off island as a high tax and high cost of living will put everybody off.

I think we as an island need to accept that we will be become poorer year on year for a good few years and stop wasting money on things we don't need. Just come out say we can no longer afford to live like we do and start working on what must be cut.

Davey West

@ Public Services need funding

August 24, 2013 at 5:59 pm

The well worn, boring cliché statement from a public sector worker who states.

“ Either some other service has to go or some tax goes up “

It was enjoyable reading until I got to that statement. The truth is that just about every person that runs their own business or household understands when money is short there have to be cutbacks, that is just the way it is, of course the services at home normally continue as they do at work, except for staff redundancies.

The two appalling mistakes the Jersey States make, employing chief executives and managers ( and still make ) is that he or she is rewarded through the Hayes system which says as they empire build and the staff increase in their department, they get paid more. Where is the incentive to be efficient and thrifty ?

Complete Madness, without proper accountability and transparency built in, which it clearly is not, spending other peoples money holds no fear and is truly easy.

As an example how many work at Guernsey’s education department and how many are non teaching jobs doing what, and at what cost ? The same question was asked in Jersey and Mario Lundy boss of education refused to give out the figures. Unbelievable !

The second fatal mistake is that the head of department does not appear to be penalised or held responsible for overspends or expensive mistakes and failure. Further more, refusal by stealth to implement an elected Government decision on time and on budget carries no penalty.

There is also the big problem of incompetent Staff being promoted instead of demoted or sacked as they would be in the not so cosy commercial world which is alien to them.

Public service needs funding, obviously ! The States have no money or assets, every thing belongs to the islanders. Every penny spend including remuneration for all staff top and bottom should be in the public domain and negative elements of the workforce should be dealt with not left to dilute a quality administration or department.

Positive and competent staff of whatever age should be encouraged and promoted getting rid of the longest serving, or he / she is friends with the boss so gets promotion culture which exists today.

If the public sector staff don’t want transparency or to work efficiently, find a job elsewhere.

Davey