The plan will also include greater financial assistance for thousands of less affluent households, more spending restraint, additional charges on motoring, and increased revenue from company tax changes.
P&R outlined the key parts of its revised tax plan yesterday in a written briefing to States members later seen by the Guernsey Press.
The memo was issued 24 hours after the senior committee announced that it was working up a new tax plan and intimated that it would soon ask the States to drop the GST-plus package agreed by the previous Assembly, which included introducing a 5% goods and services tax in the current political term.
‘P&R is aware of speculation around the tax package we have been working on and we have heard that some members are sharing that speculation with the media,’ said P&R president Lindsay de Sausmarez.
‘For clarity, I can confirm to members that P&R’s more moderate package of measures will blend a GST but at a lower rate (3%), a suitable package of mitigations to protect lower-income households, reforms to social security which take into account concerns over various aspects of the previously-approved measures and the views of the Employment & Social Security Committee, transport tax reforms, and proposals based on the recommendations of the [company] tax review sub-committee.’
Taxes overall would be increased less in P&R’s revised plan than in the GST-plus package.
The final proposals will be published in full in a policy letter on 8 June ahead of the States’ landmark tax and spending debate in mid-July.
‘While we felt it important to provide members with an overview of the type of blend we are working on, we won’t go into the finer detail in advance of the policy letter, as it is designed as a package,’ said Deputy de Sausmarez.
‘Discussing individual elements out of context of the whole does not really work. We will brief all members on the full details at the earliest opportunity, but in the meantime it is important that we can finalise our proposals in the normal way.’
Meanwhile, senior politicians insisted that proposals to scale back planned increases to social security contributions, especially on employers, had not yet been finalised, despite claims circulated by the Chamber of Commerce that it had secured specific concessions.
Chamber told its members that the revised tax plan would include smaller and more gradual increases to employer contribution rates, alignment between the treatment of the employed and self-employed, a new income tax deduction for employer contributions, and taking no contributions out of unearned income, such as property rent.
Deputy de Sausmarez and ESS president Deputy Tina Bury told Chamber yesterday that it had jumped the gun.
‘We had a very positive discussion with the Chamber and some of its members yesterday, but we do need to clarify that any suggestion that the proposals have been finalised is premature,’ they said in a joint statement.
‘It was made clear in the meeting that the reworked social security reforms, developed by P&R in response to industry feedback, were still subject to discussions with ESS.
‘When we met with the Chamber, we were clear that these were working proposals and this is something we feel we should emphasise.’
Members of ESS were particularly disappointed to read the Chamber’s claims and some saw them as an attempt to bounce the States into policy changes favouring more affluent households.
ESS vice-president Jayne Ozanne said the committee still ‘needed to discuss these matters in depth’ before reaching a conclusion. She was not speaking for the committee but her views were understood to be shared by several of her colleagues.
‘I for one remain committed to spreading the tax burden in a far fairer way across both earned and unearned income,’ said Deputy Ozanne.
‘There are many islanders who do not have an earned income from the workplace but who have substantial unearned income, and we need to take that into account.’
Scrutiny president Andy Sloan was unimpressed by P&R’s approach to communicating its revised tax plan over the past couple of days and questioned the judgment of the senior committee.
‘P&R looking to vary the [GST] rate at this late stage is mildly mad in my view,’ he said.
‘Not only does it throw up a load of question marks over distributional analysis, it doesn’t make for serious economics and it gives the impression that politics trumps principles.’
Deputy Sloan rejected a suggestion that he had been working up an alternative tax package of his own with a different rate of GST.
He hoped P&R’s plan would incorporate the social security changes which the Chamber claimed it would.
‘I am glad to see common sense might prevail with ESS stepping away from proposing applying social security on all worldwide income,’ he said.
‘Frankly, it’s a travesty that it was ever mooted and that it should have taken pressure from the likes of Gpeg, industry and myself for that to be walked back.’
A spokeswoman for the Chamber said yesterday that it did not wish to comment following the clarification statement issued by P&R and ESS.