GST is now favoured option to tackle financial black hole
A GOODS and Services Tax has emerged as a recommended option as the States seeks to tackle the island’s financial black hole.
Policy & Resources has published its policy letter on the tax review, and it asks deputies to agree in principle that any reform of the tax system should include a GST.
The senior committee said it could not recommend an income-based health tax because it would ‘exacerbate the risk and vulnerability’ with the existing narrow tax base.
The senior States committee has unanimously supported the report.
Treasury lead Mark Helyar again yesterday mixed a need for tax rises with a desire to cut costs, while president Peter Ferbrache said decisions had to be faced.
‘We cannot kick the can down the road further, so this States must come to an agreement,' he said.
‘We don’t have time to fiddle around the edges in a way that distracts from the core problem, which is increasingly urgent.’
P&R has stressed that tax reform is just one part of the solution in bridging the forecast annual £87m. structural deficit.
It also wants to grow the economy and reduce costs within the States, although the document states that ‘operational efficiency alone cannot meet the scale of this challenge.’
New information included in the report is that a high compulsory registration threshold for GST of around £300,000 would be considered.
It is estimated that this threshold would protect between 30% and 50% of local businesses.
They would still be subject to GST on taxable supplies, but they would not have to charge GST on their sales, nor make any remittance to the States.
An international services equity scheme would also be considered to reduce administration for much of the finance sector.
P&R has not said whether it would prefer a 5% or 8% GST. All tax options remain on the table, and it wanted a ‘full, open, no-holds-barred debate’.
It is estimated that a GST would cost about £800,000 a year to administer.
