States estimates indicate that the island’s poorest households would be £240 a year better off from 2025 through a combination of support measures.
The households faring best would have £350 more than they currently do, and overall, depending on how much they spend, the States calculates that nearly six out of 10 homes would be better off under the new proposals.
Those least impacted by the proposals would be paying an effective tax rate of just 9%, but at the other end of the scale some of the island’s highest-earners would find themselves paying an effective tax rate of 29.1%. They could be more than £9,000 a year worse off.
The top 20% of earners are targeted with the new tax system, while those in the 60-80% bracket should find themselves only £1,000 or so worse off each year.
The States also indicates that low- to middle-income pensioner couples may see a larger negative impact than working age households of a similar income.
In the report P&R said it was conscious that the poorest in our community struggle financially, and so have tailored the package of measures to protect lower income households.
‘The proposals, if adopted as a package, are not regressive, despite the inclusion of a GST,’ it said.
‘They are designed to ensure that the poorest households pay less than they do today and place the burden of additional revenue-raising on those more able to pay. In fact, the analysis shows that more than 73% of the poorest third of households would be financially better off than they are today.
‘This is made possible because the revenue-raising is more widely distributed between households, businesses and visitors and non-residents and because the restructuring of the income tax and social security systems will directly and deliberately help those on the lowest incomes.’
The committee has described both its restructure of social security – said to be central to the proposals and particularly beneficial for low-income working families – and the overall package of measures as ‘progressive’.
The new 15% income tax band should reduce the personal income tax liability for all ‘uncapped’ taxpayers, and mean the cost of GST is ‘at least partially offset’, though the States admits that this benefit will be focused on middle- and lower-income households.
States pension and income support benefits are to be increased in advance as part of compensation for the less well-off.
‘Clearly it is not desirable for those households in our community who are the most financially vulnerable to wait 12 months for compensation.'