How much is it going to cost private businesses to implement?
YB: For a lot of businesses who have electronic point-of-sale machines to run their business, then it’s not going to be a great deal, because all of these machines are already set up, because Guernsey is one of the very few places in the developed world that does not have a GST.
We are aware of some places, which don’t have such a digital set-up, and the States are putting aside £1.1m. to help small businesses to implement the system.
LDS: We’ve been running workshops to understand the practical implications of putting this kind of system in place, and we’re really keen that the support we provide is the support that businesses will find most useful.
Most of the accounting systems that they would ordinarily be using and the point-of-sale systems are already geared up for this kind of tax, because we’re the outlier in not already having it.
Why not tax businesses other than regulated businesses? Why do builders etc. pay no tax?
AN: This package is very much aimed at businesses. If you look at the total split, business taxes and the ISE scheme, which is a scheme that’s introduced for businesses to exempt themselves from GST, then we have 68% or two-thirds of the total are being paid by businesses, and so we think this is very much aimed at businesses and not personal taxpayers.
LDS: When you factor in the additional contributions on the social security side from employers, then actually they are doing a lot of the heavy lifting. Over two-thirds of the additional revenue will actually be coming from businesses and employers, a decent chunk of that from regulated businesses, but not just builders.
We do actually include recommendation to extend one of our corporate tax schemes to builders, but not just yet, and there’s a really straightforward reason for that. We are playing catch-up in terms of that historic under-investment in infrastructure and housing, in particular. We need more supply of housing.
Now is not the time to be introducing any additional barriers to the construction sector when we need to provide more housing for islanders.
We do recommend, as part of our package, having another look at that as part of the review in 2030.
How do you know you have a black hole when you’re obviously very behind with income tax assessments? We are expected to submit our tax returns or be fined, yet I’m still waiting for my assessments from 2023 and 2024.
YB: The majority of tax that goes into the Revenue Service comes through the ETI, which is Employee Tax Instalment Scheme. That’s what’s taken out of your wages each month automatically for tax based on your coding notice, and it gets sent quarterly by your employer to the States Revenue Service, so we have a pretty good idea based on the 90% of revenue that we get in through that scheme, and also based on previous year’s estimates that we can work out fairly accurately.
LDS: I appreciate some people are waiting for repayments, but some people also get bills for extra tax when the numbers haven’t quite worked out, but those things generally even out, so the numbers that we get are pretty accurate so that is how we know what that sort of income is likely to be, and how we can make a good assessment of where our shortfalls are going to be.
In terms of the black hole or funding gap, it is actually to do with our reserves, which we’ve been digging into for 20 years, and we are very well aware of what the levels of those reserves are, and at the current rate we can expect those to have run out around 2030/2031.
That’s why we need to introduce taxes now. We know that we’re not bringing in enough tax, we know that we need to broaden our tax base, but we also know that we’re too reliant on our reserves, and that’s just unsustainable going forward.’
YB: 2028 which is just 18 months away, is going to be the last year where our reserves exceed the amount that we have borrowed. That is the gravity of the situation. If we don’t do something, we will be in a position where we can’t make any investments in infrastructure that this island absolutely needs, particularly work around the harbours, hospital, and education areas that are really important to people.
AN: We haven’t kept up with the completion of people’s tax returns and assessments in the way that we should have done, and that is not forgiveable. We should be on top of this, but we’ve now got some very good people who are working within revenue services that are working to deadlines to ensure that we do get on top of this.
It isn’t a case that we can’t afford to refund your tax, and in terms of our overall accounting, we’re probably already accruing for people’s taxes that we’re both receiving and due refunds, however, it’s a case of administrative burden that we haven’t got on top of yet.
LDS: This was an IT project that didn’t deliver the benefits it should have, and so all the problems that we’re experiencing at the moment are a legacy of that. We do now have a really good recovery plan and that is well under way.
It seems there aren’t enough staff at the Revenue Service at present. How do you propose to get enough staff for tax returns as well as GST?
LDS: GST is not a complex tax to administer, compared with income tax and social security, so it won’t actually need very many additional people in the Revenue Service team.
All of that has been factored in and netted off against the revenue, so that’s part of the cost of actually administering GST.
It won’t actually require an awful lot more people in Revenue Service. I think from memory it was about six.