An amendment approved on Friday directed that a single common tax rate framework – which could set the same headline rate for income tax, social security contributions and a goods and services tax – must be among the ideas considered by P&R in a future tax review.
The move did not alter the current tax package presented to the Assembly by P&R, and four of its five members voted for the amendment, which was laid by Mark Helyar when its original proposer, Andy Sloan, was called away on urgent family matters.
‘He believes that, every so often, we need to step back from individual taxes,’ said Deputy Helyar.
‘We need to ask not how we raise another £50m., but what sort of tax system Guernsey actually wants – one which simply raises revenue, or one which also strengthens our international competitiveness, supports sustainable economic growth, and provides a strong foundation for the economic model upon which our prosperity ultimately depends.
‘Good tax systems don’t just raise revenue the government requires. They also do the least possible damage to economic activity and for a jurisdiction like ours that matters enormously.’
P&R’s treasury lead, Deputy Charles Parkinson, speculated that a common tax framework would probably result in the rate of income tax going down and the rate of GST going up, and he had concerns that would hurt the least well-off most, but he was happy to look into the idea as part of the committee’s longer-term work.
Deputy Tina Bury, one of only three members to vote against the amendment, cautioned that completely redesigning the tax system would be ‘a very significant structural change and be a huge piece of work’.
The amendment’s seconder, former treasury lead Deputy Gavin St Pier, reminded members that P&R’s own tax review sub-committee had set out the need for a full review of the whole tax system. He saw Deputy Sloan’s idea of a single headline rate as a way of potentially encouraging economic growth.
P&R has not put a definitive timeline on when the whole tax system will be re-examined, but it seems unlikely that the work will be undertaken during the current States term.
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