Treasury analysis shows most are ‘better off’ with GST-plus

And almost every household would pay more in extra tax if 2p on income tax became permanent, than if the States was to adopt GST-plus, Deputy Peter Roffey’s amendment to the Budget.

The figures, compiled by treasury officials, were released late yesterday in a report published by Deputies Peter Roffey and Peter Ferbrache to support their amendment, which will be presented as an alternative to putting up income tax at next month’s Budget debate.

‘The difference is so striking that it is hard to conceive how anybody could prefer the pure income tax route for raising additional revenue, given its significant impact on low- to middle-income households,’ said Deputy Roffey.

P&R has asked the States to put up income tax to 22p in the pound for 2025 and 2026 only. Deputy Roffey has claimed that the rate would never return to 20p in the pound, and has instead proposed a permanent 5% goods and services tax from 2027.

‘Once fully implemented, both would raise about the same amount of money but just about every single local household would be better off under my GST-plus amendment,’ he said.

‘This is because it raises far more money from both the corporate sector and visitors than simply sticking an extra 2p on income tax.

‘Just as importantly, the lower you go down the income scale, the greater local households would benefit from my amendment, shielding those least able to cope with rising costs.’

P&R’s package and Deputy Roffey’s amendment could each raise about £80m. a year. Both include higher personal tax allowances, more income from social security contributions and additional company tax receipts of £30m. a year from changes known as Pillar II.

But the GST-plus plan also includes a reduction in income tax to 15p in the pound on income up to about £32,000 a year and a new personal allowance of about £15,000 a year free of social security contributions.

The least well-off quarter of households would be better off under both P&R’s package, if it was made permanent, and Deputy Roffey’s amendment, although the benefit is greater under the latter.

Middle-income households would be left worse off with a permanent 2p increase in income tax but should be better off under the GST-plus plan.

‘I believe more and more people, and nearly all of my colleagues, are realising that the States has no choice but to raise extra revenue in the face of Guernsey’s changing demographics.

‘The treasury analysis puts into very stark relief how much fairer, progressive and sustainable the GST-plus package is, compared to what is being proposed in this year’s Budget report,’ said Deputy Roffey.