Other tax options looked at but not ‘big ticket’ items
MEMBERS of the panel leading the island’s tax review, and currently pushing the need to raise taxes, almost certainly through either income taxes or a goods and services tax, to make up a predicted annual shortfall of £85m. per year, met the media in a live press conference broadcast on Thursday evening. Simon De La Rue was there for the Guernsey Press and outlines all the media’s questions, and the answers, as they happened on the evening
.What is the expected effect of a GST on inflation?
Deputy Peter Roffey: ‘It depends on the rate of the GST. We have fairly good experience from Jersey of exactly what the impact was there and so putting 5% on GST would not relate directly to a 5% increase in inflation. I think, in Jersey, they reckoned a 5% GST put about 3% on inflation.’
Deputy Mark Helyar: ‘I think it was 60% of whatever’s put on, in the first year, and then it ameliorates.’
.Is it certain that a GST will be proposed to the States?
Deputy Helyar said GST and income tax are the only ways to raise the sum required. ‘If you wanted to create a hotch-potch of smaller opportunities, then it would need to be spread across a much wider group of taxes and some of those effects might be difficult to predict.’
Deputy Roffey: ‘TRP raises about £25m., so if we wanted to raise another £75m. to fill most of that black hole, we’d have to quadruple property taxes. We have gone through all of the suggestions.
Some people have said we’ve just gone away and come back with the same two things. Well, yes we have, but not before looking in depth at things like environmental taxes, motoring taxes, property taxes and all sorts of other options and we think they all have a role to play. They’re just not going to be the big ticket item.’
. How will the tax debate be different this year, given that you are coming back with identical proposals?
Deputy Helyar: ‘We need to be able to convey clearly what the problem is that we’re trying to solve. There are lots of tropes out there about the fact that there are too many civil servants and they’re all overpaid and we can just cut services. It simply isn’t true, I’m afraid. Most of the pressure that we have on costs will come from additional nursing staff and elderly care and things like additional drugs and pensions.’
Deputy Roffey: The £85m. shortfall is what will be missing after cuts have been made and growth has been achieved. ‘It’s not as if we can do that instead. We need to do that as well.’
Half of the expected annual shortfall is down to the reduction in social security contributions caused by a decline in the working population. This problem is already being addressed by a gradual increase in contribution rates, above inflation, over several years, which has already been approved by the States. However, this is placing too much of a burden on those earning low incomes and is therefore unfair. ‘That’s something which motivates me to find a better way forward.’
. Matt Fallaize from Bailiwick Express challenged Deputy Helyar’s views (above) on public spending, noting that the deputy’s election pitch was counter to that approach, and that the remaining members of the Guernsey Party, which Deputy Helyar leads within the States, still intend to vote against increasing taxes. ‘Are you now having to challenge a public narrative that you helped to create?’
Deputy Helyar: ‘I’m not here to answer party political questions. I’m here on behalf of the Policy & Resources committee.’
. Can each of you explain when you first became convinced that a GST of 8% plus mitigations was the right way for Guernsey to go?
Deputy Roffey: ‘It’s hard. It’s an evolutionary thing. It was counter-intuitive to me because I’ve spent years fighting against a GST because of its regressive nature. First I became convinced that we absolutely had to increase taxation or vital public services would be badly damaged. If this is unpopular – and I understand it is – it’s nothing compared to what would happen if basic healthcare had to be reduced and pensions went down in size.’
Deputy Helyar: ‘The thing which does it for me is, if people are concerned and want to work out what their personal impact is, if you work out what 6% on your whole salary is, in comparison to what 5% or 8% is on your shopping. It’s a very different sum and spread across a much wider group of people.’
Mark Thompson: ‘The big driver for me on this is the social security, which I’ve recognised for quite some time is unfair in the way it falls on the population.’
Bethan Haines: ‘Since the work we did in 2015, we became particularly concerned about the reliance we had on the working age population and that a GST would spread the load a bit better, it would broaden our tax base and collect income from visitors and those who live off capital.’
. Is it a no-brainer for economists?
Ms Haines: ‘Well I think it is a no-brainer but I appreciate the concerns of the community and that it is a regressive tax and we have to deal with that.’
.If you can’t fix this problem, will you resign?
Deputy Helyar: ‘I very much doubt it. There aren’t many other answers to these questions and the States will have a full opportunity to debate them and to amend them. It is not my decision, when it comes down to it. This is the assembly’s decision.’
. Is this a way of shifting the tax burden to take more from the growing number of elderly islanders?
Deputy Roffey: The wealthier people of retirement age will pay more but the pensioner on £15,000 a year will be better off.
Deputy Helyar: A GST will also bring in more money from corporates, from visitors and from those living off capital who are wealthy but officially have low incomes.
. Your Facebook feed hit 475 people [during the briefing]. Is your campaign going to cut through?
Deputy Helyar: ‘We can but try.’ States members have requested that the working party has conversations with retailers, manufacturers, importers and exporters and other stakeholders.
Deputy Roffey said the conversation has already moved on from questioning whether taxes need to increase at all, to looking at how it needs to be done. ‘That’s progress. It is moving in the right direction.’
. Do you have adequate support among States members?
Deputy Helyar: ‘This isn’t a nil sum game. It does need to be dealt with.’ Said States members may be afraid to stick their head above the parapet, but the problem has to be addressed.
. Will you definitely present the States with a suite of options or might you just offer your preferred 8% option for debate?
Deputy Helyar: ‘I doubt very much it would be a single proposition. I think there will be a suite of options and even if there isn’t, I suspect members will create one with amendments.’
. What will be exempted from this GST?
Mark Thompson: ‘That hasn’t been decided but we’ve looked at the Jersey model which has a broad base with very few exemptions other than housing costs. It keeps it much, much simpler and it keeps the rate lower because the more exemptions you make, the more you have to charge on other items. The working assumption is that it will be very broad based, but that hasn’t been finalised.’
. So food, children’s clothing?
Mark Thompson: ‘I think the way to deal with that is through adjusting pensions and benefits, so the people who need help to buy those things are helped in a different way.’
. When will that list of exemptions be published?
Bethan Haines: ‘Certainly by the time the policy letter is published.’