The Guernsey Retail Group believes that a goods and services tax (GST) could lead to the closure of up to one in four shops and has called on States members to reject it.
‘One of the claims we hear regularly is that GST will damage small businesses.
‘It’s not true, but it’s a common misunderstanding,’ said Deputy Helyar.
P&R’s tax and spending package, which will be debated by the States next month, assumes that businesses with a turnover of less than £300,000 annually would not need to register under the GST system or collect the tax from customers.
‘At this level it is estimated that more than 50% of incorporated businesses outside of the finance sector would not be required to register,’ said Deputy Helyar.
‘This high registration threshold helps protect smaller businesses from the cost of administration.’
P&R has claimed that some business groups argued for a high turnover threshold, as opposed to a lower one such as the UK’s value added tax (VAT) threshold of £85,000.
But the Chamber of Commerce said many companies could benefit from registering for GST. In particular, registered businesses could make claims to recoup GST paid on business-related purchases, which it said could result in substantial savings.
Chamber president Diane de Garis questioned the wisdom of P&R’s proposed threshold.
‘With today’s advanced accounting systems, managing GST can be simple and the potential advantages of reclaiming input GST often outweigh the administration concerns,’ she said.
‘In registering for GST, your business effectively becomes neutral in the tax chain.
‘It collects and pays out, with the net amount being forwarded to the tax authority. Setting a high bar might inadvertently hinder growth. Businesses might limit their expansion to avoid GST registration.’
Jersey’s GST system also includes a business turnover threshold of £300,000.
P&R has previously acknowledged that many companies there with turnover under £300,000 choose to register for GST anyway.
‘In Jersey, registrations by businesses under the threshold are common, particularly where a business is importing goods since it smooths the import process and allows them to reclaim GST costs on their inputs,’ said P&R in its policy letter on tax thrown out by the States in February.
‘Unregistered businesses will pay GST on their inputs where appropriate, including imported goods, but will not collect GST and will not remit money to the Revenue Service.’