GST is the obvious thing to do – States treasurer

Bethan Haines was a member of the panel which briefed islanders on the Bailiwick’s tax review yesterday evening, in a live broadcast which followed the format of the now-familiar Civil Contingencies Authority briefings.

‘I do think it’s the right solution, at some point’, she said.

‘Guernsey is almost unique in not having a GST. Most countries consider [it] a fundamental cornerstone of their tax system. In fact, the EU requires all of its members to have one. I think it is a no-brainer but I appreciate the concerns in the community and that it is a regressive tax and we have to deal with that.’

The need to compensate those on lower wages is behind the tax review committee’s preference for a GST of 8%, rather than the 5% which has also been tabled as an option.

The extra money would pay for social security contributions being means-tested, the income tax allowance being increased, and pensions and benefits going up.

Ms Haines drew attention to the reduced birthrate of recent decades, combined with the increase in longevity in the population, to illustrate the anticipated £85m. gap between what the States will be collecting in tax and what it will need to be spending in the coming years. She said this picture also demonstrated why increasing income tax, which is another option being tabled, would carry greater risks than the GST options.

‘Almost two-thirds of the income the government receives is in the form of income tax and social security contributions,’ she said.

‘This means that we are very dependent on the amount people in the community earn – much more so than other jurisdictions.

‘We could increase these taxes, either for everyone or by having a higher rate for higher earners. However, that just focuses more of our revenues on those people who are already paying the most and are reducing in number.’

Ms Haines said increasing income tax could also damage Guernsey’s competitiveness as a jurisdiction. She said she had favoured a GST for some years. Fellow panellist Mark Thompson, a chartered accountant, chartered director and former chairman of the Institute of Directors, said he had been persuaded during debate on the issue seven years ago. The other two panellists, deputies Mark Helyar and Peter Roffey, are more recent converts, having spoken out against a GST during their 2020 election campaigns.