Sounds familiar? Probably painfully so, but in this instance I am not talking about Guernsey.
There will be no discussion of GST-plus, either at 5% or 3%. Almost certainly no consideration of income tax. And definitely no reliance on motor tax to balance the books – unless by that you mean tractor licensing. You’ve guessed it. This tax debate is happening in Sark.
I was interested to know more, so I caught the Corsaire and attended one of a series of tax review drop-in sessions put on by Chief Pleas’ Policy & Finance Committee. The venue? The Mermaid pub, with members of P&F sitting on the pool table. Well, it is Sark.
For a Guernsey resident, used to government revenues being mainly raised through income tax and social security contributions, Sark’s very different system took a bit of getting my head around. I still don’t claim to know it all.
In Sark your contribution to the public exchequer is based not on your income but on your property and/or other personal assets. Not only that but there is currently total reliance on your honesty when you declare those assets – no check-ups by government.
So what changes are on the cards? Quite dramatic ones. But still no talk of income tax. Such an idea seems to be regarded as completely outre by all concerned. I guess it is just a different way of defining ‘wealth’ – assets rather than income – although probably neither is perfect.
At the moment many people are exempt from them even being considered for Sark’s personal capital tax. For example they can avoid it by paying a higher property tax called the ‘forfait’. Policy & Finance argues that is unfair, as this tax doesn’t relate to people’s ability to pay.
Not only that, but anybody else living in the household of someone who has paid the forfait is eligible to pay Sark’s minimum tax level. (Are you following this?) So, in theory, half a dozen millionaires could share a house and pay very little between them.
After the tax drop-in was over, I moved to the Old Island Hall for dinner, live music (with the Seigneur in the band) and a chat with Policy & Finance vice-chair, Conseiller Natalie Tighe. She is one of those leading the tax review and says feedback from the community has been clear that this provision isn’t fair.
‘If you live in a household with the possessor who’s paying the forfait, you can elect to pay the minimum tax. Coming off the back of Covid, the tax assessor confirmed that there were some properties where there were multiples of people living in houses paying the minimum tax, so that was identified as a loophole which people wanted closed.’
P&F is proposing that this option for paying minimum tax should disappear next year, with the whole forfait system being removed in 2028.
That would leave everybody subject to personal capital taxation. But it won’t mean everybody will need to actually declare their assets. These can still remain confidential so long as the resident concerned is willing to pay Sark’s maximum tax level. This currently stands at about £13,000. To an outsider this looks like quite a steal for someone who is seriously wealthy. Certainly when you compare it to Guernsey’s tax cap.
Another major change in the pipeline will be the auditing of some tax returns. Traditionally Sark has relied on the honesty of those estimating their own wealth, but in future the proposal is to check the accuracy of a small sample of returns – just in case.
P&F says the reforms have been in the pipeline for a long time and are not being proposed as a result of the recent £1.5m. loan from Guernsey to buy the Sark Electricity Company. Rather that they are needed to invest in major capital projects like stabilising La Coupee, repairing rockfalls at the harbour, and modernising Sark’s sewage and waste disposal system. They also point to the need for revenue spending in areas like health and education.
The public feedback which has informed the review came from a survey in late 2024 which saw 50% of islanders taking part and giving their views on the tax system. I confess I was taken aback at the ‘Mermaid meeting’ when one or two people who were opposed to the changes questioned the validity of a survey where ‘only 50% of islanders had responded’. Blimey, I thought, if the States of Guernsey got 30,000 responses to one of their consultations, they would regard it ask an unbelievable success.
Another comment made at the meeting struck me as a slightly odd argument. One attendee claimed it was completely unfair that a property they owned in the UK should be taken into account when reckoning up their assets. Why so? Because their adult son lived in it, and they didn’t charge him any rent. I found myself thinking ‘Why not charge him rent then?’ But what do I know? After all I am from Guernsey.
That is not to say that there is no serious opposition to the proposed reforms. On the next bar stool to me was Chief Pleas member Conseiller Sam Keyte, who reckoned that even next year’s planned interim changes could put up tax bills for ordinary islanders considerably.
Another argument is that whole package of reforms might drive people away from Sark. Particularly the very wealthy. Those behind the proposals dismiss that as scaremongering. Maybe so, but whatever the reason, there is some anecdotal evidence that Sark’s population may already be in decline. For example one reason given for justifying a recent increase in electricity charges was a 14% fall in consumption. People just economising? Maybe, but it also tends to suggest the population might be falling. If so that would be a concern for an island with zero economies of scale.
Before ending this meandering feature I must reflect briefly on the way that Sark does politics a bit differently. At one stage at the Mermaid session I made a note that the meeting was getting very tetchy. With some raised voices, it really did seem as if there was some visceral anger towards the panel.
But a minute later I was scratching out that note as someone mentioned how good it was of P&F to organise such sessions and the warmth of the applause from even the staunchest opponents was palpable. A classic case of being able to disagree strongly, but agreeably, it seems. Something Guernsey needs to rediscover.
So what happens next? The Chief Pleas debate on the interim tax reforms, proposed for next year, will take place in the autumn. Then those driving the process will have to work up their final proposals and convince (or otherwise) their colleagues to go along with them.
Either way, I am certainly enjoying my mission as a journalist with a special interest in Sark and Alderney. I wonder what will be in store for my next trip to Sark? Maybe a public meeting about education in the Bel Air? Or healthcare in the Captain’s Bar?
