‘We would stick out like sore thumb with income tax rise’

Policy & Resources treasury lead Mark Helyar opened debate yesterday afternoon on the committee’s tax review – a green paper which is asking States members to determine the direction government should take in balancing the books through tax, social security and efficiencies.

He told the assembly that a rejection of GST would inevitably lead to a necessity to raise direct taxation on income and that this would make Guernsey uncompetitive. In contrast, he argued, introducing a GST would simply align Guernsey to almost every equivalent jurisdiction.

‘The evidence is that consumption taxes are so common, that people don’t consider them when deciding where to live,’ he said. This was especially the case if, as P&R are recommending, tax on income was reduced at the same time in order to prevent the lower paid being worse off.’

He further argued that Guernsey’s tax base was too heavily weighted towards tax on income, making the island vulnerable to sudden changes in economic circumstances, such as during the height of the Covid pandemic.

‘Spreading the load by GST is unarguably the best way to see ourselves through,’ he said.

Deputy Helyar was keen to reassure States members that the debate was ‘the start of a more detailed process, rather than the end of one’. He said any deputy who was unsure about GST should vote in favour of proposition four of the green paper, because the details would be worked out later and brought back for debate, possible amendments and ultimately approval. Proposition 4 asks States members to decide whether they agree ‘that any restructure to meaningfully diversify the tax system requires the introduction of a broad-based GST’.

Voting for this proposition would be a vote for more information on a GST, rather than a concrete approval of it, he said.

Debate continues today.