Tax plans comparison to GST-plus labelled as ‘misleading’

The proposer of the GST-plus tax package, Peter Roffey, recently claimed that nearly every household would be worse off under P&R’s plan to put up income tax to 22p in the pound than under his alternative recommendation for a 5% goods and services tax, together with reductions in income tax and social security contributions, and that the latter would make three out of four households better off than they are now.

The recommendation in P&R’s draft 2025 Budget is for an income tax increase for 2025 and 2026 only, whereas GST-plus has been put forward as a permanent package, starting in 2027.

Deputy Roffey has disputed that income tax would ever be reduced again if it was increased for the next two years. His claim about the favourable impact of GST-plus was based on a chart prepared by States treasury officials which compared the financial impact on households if P&R’s plan or the GST-plus plan were made permanent.

‘If it isn’t comparing apples with pears, it may be a Braeburn with a Cox’s Orange Pippin at the very least,’ said Deputy Soulsby.

During this week’s States debate on Employment & Social Security’s proposal to increase benefit and contribution rates from January, Deputy Soulsby claimed that any move to increase income tax permanently would inevitably include other changes which were omitted from the comparisons published by Deputy Roffey ahead of next month’s Budget debate.

‘I know Deputy Roffey would want to show the tax package he supports in the best possible light. I have no problem with that,’ she said.

‘However, some might say it is stretching it a bit to compare something which won’t happen until 2027 with the position for 2025, particularly given that ESS is undertaking work to reform social security contributions to make them more progressive, and as such they are very likely to look very different to how they do now.

‘A package with income tax is highly likely to look very different in 2027.’

ESS is in the middle of a 10-year plan to increase social security contributions to fund significantly higher benefits paid to the island’s growing number of old age pensioners.

And in addition to working up proposals for a portion of contributions currently paid by those on lower incomes to be paid by more affluent islanders in the future, ESS has told the States it will soon recommend changes to help pay for the rising cost of long-term care for the elderly.

‘It could come at some cost, particularly if social security contributions are increased,’ said Deputy Soulsby.

‘So it is premature to say how people will be better or worse off until that is decided, and that should form part of any decision in respect of our future tax structure.’

P&R’s proposal to put up income tax and Deputy Roffey’s counter proposal for GST-plus will be debated at a States meeting starting on 5 November.

Deputies are expected to submit a raft of other Budget amendments – including on company taxes, savings targets and motoring taxes – by the ordinary deadline of this Monday.