Data 'shows tax rise is a precarious option'
TWO deputies have asked the States Treasury to produce further tax analysis – which they say this time shows that a 2p rise in income tax will be the worst option for local households.
And Sasha Kazantseva-Miller and Dave Mahoney say that if approved, it is almost inevitable that the 22p rate of income tax will be retained for longer than two years if the States does not debate its financial position until 2026.
They asked the Treasury to model three scenarios – income tax at 22p as proposed; income tax at 22p with social security reform from 2027; and the option of the GST-plus package and restructured allowances and social security contributions. All included Pillar 2 tax revenue too.
‘We thought it would be prudent to understand the full impact on the community if the Budget 2025 measures would continue beyond 2026,’ said Deputy Kazantseva-Miller.
‘It is clear from this analysis that an income tax-led package would make most households worse-off.
She said that while the impact could be somewhat mitigated for lower-income households with the restructure of social security contributions, most households would still be better off under GST-plus.
The analysis showed the impact on increasing taxes on employment and labour, she added.
‘This data brings into stark focus the negative impact an income tax-led strategy would have on households even with some mitigation measures achieved through a social security contribution restructure,’ said Deputy Sasha Kazantseva-Miller.
‘Given the high cost of living and doing business in Guernsey, this data helps to show more clearly, that an income tax-led strategy is a precarious option with the potential for highly detrimental economic impact both in the short and long-term.’
The deputies said that the public had been sceptical about the 2p on tax proposal and the fact that it would be limited to two years.
They said that, if approved, it was ‘extremely unlikely’ to prove temporary in nature, unless further revenue-raising measures were agreed and implemented by 2027, near-impossible when debate is not scheduled until September 2026.
‘While the rationale for bringing forward the income tax increases in this Budget is to serve as an immediate but short-term revenue-generating measure, we must be cognisant of the high risk that such measures could be in play until 2029,’ Deputy Mahoney said.
