Guernsey Press

GST at 5% is States’ plan to fill £70m. deficit

SENIOR States members are already facing a backlash on new tax review proposals which mix a 5% goods and services tax with major changes to income tax and social security which they say will leave more than half of islanders better off, even with a GST.

Policy & Resources president Deputy Peter Ferbrache explaining the proposals to fill the island’s financial deficit at a media briefing. (Picture by Peter Frankland, 31512729)

If approved, the moves announced yesterday by the Policy & Resources Committee would bring in an extra £50-60m. for public finances by the end of 2025, to address a projected structural deficit of £70m. and rising.

It has said that lower and middle-income earners will see the least impact of the changes, while a handful of those at the very top of the income bracket will be hardest hit.

With a broad-based 5% GST – the original additional option of 8% has been dropped – households will pay more than £50m. in the new tax each year, but can expect to get £29m. back through tax reform.

The introduction of a GST would be mitigated by a new income tax band of 15% on the first £30,000 of income. The States say that someone on median earnings, at about £37,000 a year, would see their tax bill reduced by about £900 a year.

It is also proposed to restructure the Social Security contribution system to reduce the liability of low- and middle-income households, while raising more in total from islanders and especially employers.

After it unveiled its proposals, P&R fronted up before an audience of just 45 people at Les Beaucamps High School last night to explain itself and answer questions.

P&R president Peter Ferbrache, who is fronting the report, said he felt the evening had gone well, with an audience of another 400 or so watching proceedings online.

'I would have liked them to have the opportunity to ask questions but we'll be doing more of these and they'll get the chance then.'

He described the questions as 'probing and decent' but acknowledged that there was a long way to go to sell the idea of the tax reforms.

'Ultimately, States members will decide,' he said.

'We'd all love to say no to GST – that would be the easy thing to do – but it would not be the responsible thing to do.'

Partly due to the States' online issues, deputies were slow to get their copies of the report.

But some have already come out against the proposals, largely on the basis that the States has not worked hard enough to save money before seeking to raise new taxes.