Will Budget bring 2007 heaven?

Ernst & Young tax partner Graham Parrott passes a special agent's eye over the proposed 2007 Budget A WEEK after the launch of the latest reincarnation of Ian Fleming's fictional super hero saw the Budget unveiled by Treasury and Resources.

In the world of films, while not to everyone's taste, the latest Bond is a radical departure from what has gone before, no doubt in an effort to keep pace with the times and reflect the current political and social environment.

While Casino Royale would be difficult in Guernsey, here the scriptwriters have stuck to the tried and tested formula.

To an extent their hands have been tied by the outcome of the long-running tax debate, but this could still be seen as a missed opportunity, being one of the last Budgets before the introduction of a zero rate of corporate income tax on 1 January 2008.

It acknowledges the need to control public expenditure.

The overall increase is modest, with a shift in emphasis towards the key areas of health and education.

As for raising revenues, the direct tax measures are very much as expected. The rate of income tax remains at 20%. Personal allowances are frozen again and will be for 2008.

In the area of indirect taxation, the usual suspects have been hit, with increases in duty on tobacco and particularly alcohol.

A martini will be more expensive now whether it is shaken or stirred.

One measure that will attract some attention is the significant increase in fuel duty, which may make a Mini more attractive than an Aston, although there was no increase last year.

This is not to be confused with increases in duty to replace road tax, a separate issue in itself.

Increases in tax on rateable value were well trailed, with the increase perhaps less than might have been expected.

Some measures have been left until next year, including the changes to interest relief which will affect many homeowners.

So overall a very predictable, safe budget, with £20m. being transferred to reserves, but perhaps too safe given the island's current position.

Whether a braver Casino Royale approach would have been appropriate remains to be seen.