IoD gives its backing to full review of fiscal policy
MIDDLE and lower earners in Guernsey are effectively paying more tax than they would in the UK – and it’s time for a review, say business chiefs.
The local Institute of Directors branch is backing a review of the island’s fiscal policy in response to the annual independent fiscal policy review 2017, which examines the States of Guernsey’s strategy.
The policy review’s authors said the recent revision of Guernsey’s GDP was ‘an opportunity for the island to re-evaluate its fiscal position, spending levels and core strategies’. Following changes to how GDP is calculated, it was re-stated from an original £2.4bn in 2016 to £2.86bn.
The same report noted that only Mexico and Chile collect a lower proportion of GDP as tax than Guernsey, according to international statistics. Lower taxes could be seen as providing the island with an advantage, said the report, or that Guernsey still has ‘headroom’ to raise revenues while maintaining this competitive position.
‘Whilst comparatively low as a broad measure, the tax take itself is narrow, focusing mainly on employment taxes. Those that bear the burden of the take are unlikely to recognise the report’s comments,’ said John Clacy, pictured left, the incoming chairman of the local IoD branch.
‘Indeed, those in the low to middle employed tax brackets suffer effective tax rates above those seen in the UK. Nonetheless, the report’s observations are correct and strongly support a full review of the island’s fiscal policy.’
He added: ‘One thing is clear – if we are to increase the tax take, we should take care that it’s not from the narrow band of the economy currently bearing the burden. The IOD strongly supports a review of the island’s fiscal strategy in light of the report, but this comes with a caveat.’
Gavin St Pier, Policy & Resources president, has said that higher taxes would be needed if the States wanted to increase government spending – stressing that the economy has not changed as a result of the GDP re-statement, only the data.
‘The 28% of GDP in the States’ fiscal framework is an upper limit in terms of the amount of revenue government generates via taxation, it is not a target we should be aiming for, and it remains the intention of P&R to take no more tax off the hard-working Guernsey public than absolutely necessary,’ he added in his response to the independent review.