Tax reform – choose your least-worst

NOW that the chickens, to use Policy & Resources treasury lead Mark Helyar’s expression, have come home to roost, the outcome of the taxation review is really rather simple. Which of three options do you, Mr and Mrs Taxpayer, prefer to relieve you of an extra £2,000 or so a year?

Pay more tax on your income, embrace a GST charge on everything you consume or adopt a pick-and-mix approach between these two… the net result is the same. Government wants the ability to raise up to £75m. a year more and push the limit of what it currently claws from islanders up to 24% of gross domestic product.

The package is predictable in its income vs consumption fund-raising, proposes practical restructuring of the social security contributions system and is open about the impacts of either approach – including triggering inflation.

P&R is also correct to propose releasing the details behind today’s announcement as a ‘green paper’ – a Billet d’Etat item to be debated but not altered, thus sidestepping the traditional but often destructive States’ sport of seeing which amendment to a major policy wins on the day.

Serious debate is required over these proposals, interest groups need to have their input, and a wider range of minds must be engaged to tease out the full consequences of the changes, particularly on the less well off, the retail sector and pensioners.

As those discussions begin, it is helpful to remember these increases were not inevitable. Previous un-costed States decisions triggered them, worsened by the Covid pandemic. The £75m. ‘ceiling’ targeted by the package may not resolve all immediate and long-term fiscal challenges, and there is no guarantee this or future States won’t be equally trigger-happy in adopting policies without funding in place.

So this cannot be taken as a one-off exercise. In some respects, depending on the option selected, this review makes it easier for government to take more off islanders in future – and with less debate.

In the meantime, P&R’s warnings about no more money have come home to roost, and islanders now have to select the least-worst option to repair the fiscal damage.

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