The tax riddle has got harder to solve

While last week’s update on the States finances were better than expected, they still showed a large deficit of up to £30m. for the year on top of known structural issues.

We have not seen the detail, but one of the financial upsides was said to be exceptional growth in customs duties – Guernsey cannot drink and smoke its way into the future.

The housing boom last year has also boosted the income streams, but it is hard to see that kind of activity being repeated in a post-Covid world.

Policy & Resources has many tricky action points on its agenda. Solving the tax riddle, something that has evaded other administrations, is fundamental to the success or otherwise of this one.

It will involve tax rises – where, when and to whom they apply are the questions we wait to hear the answers to.

The UK Budget yesterday gave a glimpse of how painful it can be for individuals and businesses to help cover the longer-term economic costs of a sustained lockdown.

Governments are rightly spending to help businesses survive – Guernsey is no exception and commitments like those made to the visitor accommodation sector extend to next March and need to be covered.

The UK has not been afraid to address business taxes – the rate of corporation tax will go up to 25% for the most profitable companies from 2023.

Thresholds at which people start to pay tax on their wages have been frozen until 2026, so more people will end up paying, and those who already do will end up paying a greater proportion of their salary as it grows. Guernsey comes from a more solid financial base, but also has fewer levers than most to pull to balance the books.

In the background are also the economic challenges posed by Brexit and moves in Europe to widen its blacklist to include any jurisdiction with zero-rated corporate tax.

Whichever way P&R turns, tough decisions confront it.