Chamber says getting more people working is the answer
Increasing the size of the island’s working population by at least 1,000 in three years should be treated as a matter of urgency as one way of adding to States revenues, the Chamber of Commerce has said.
It also encourages the States to look at higher rates of income tax, pension reform and savings initiatives, rather than simply bringing in a goods and services tax.
Chamber has produced a short report, written by its finance sector lead Stephen Rouxel, in which he sets out the view that while GST is a viable answer to the deficit facing the island, it is neither the best answer, nor even a good one.
It has also published a questionnaire for members and non-members to complete and declare their position on the States’ tax review.
One avenue that might be explored was targeting wealthy pensionable-age people, who do not contribute to the system, said Mr Rouxel.
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‘There is a population of Guernsey residents who live off standard charge or capital who are currently outside the scope of income tax and as such, contribute little into the infrastructure of the island they live in.’
An additional form of income tax was put forward as another idea, structured as a health tax that would be bifurcated to only pay for the health service.
‘This is a viable option and one that could be used to tax the wealthy more successfully (through tiered rates) than a GST, and avoid needing complicated rebalancing, as is proposed with GST.’
The report backed a move towards more aggressive corporate tax, although it was accepted that there was not the scope to raise a great deal more without risking the island becoming uncompetitive.
Getting more people working was something Chamber felt should be investigated urgently, including increasing the number of women working in the 40-55 age range.
It should be possible to add at least 1,000 new workers over the next three years and this should be a proactive and stated policy objective, it said.
While the States’ has set a net migration policy of 350 people, this was not proactive. Chamber’s suggestion would not necessarily lead to more people in the island, just more people in the island working.
The tax reform plans from the States do include a drive for savings initiatives, but Mr Rouxel pointed out that there was no specific plan put forward.
‘With more than two years on the clock, the electorate deserve to see a plan that will work if the last plan does not.’
Plans might not address the deficit but should be produced to demonstrate fiscal restraint, he said.
More work needed to be done on pensions reform, and even minor changes could save a material amount over the longer term.
‘There needs to be agreement that either we are going to stop investing in our future or we are going to need to raise taxes or cut core services.’
Mr Rouxel’s report concluded that budgets for committees such as Home and Education needed real action to be constrained, since the budgets of both had been expanding – ‘in the case of Education, largely due to ill-informed policy-making, driven by sound bite politics’.
Chamber’s questionnaire is available here
