Why ‘soak the rich’ won’t work here

It’s an appealing prospect, reminiscent of veteran Labour politician Denis Healey’s oft-quoted pledge to ‘squeeze the rich until the pips squeak’. He denied ever saying it, but the very well off are an obvious target when more tax revenue is required.

But not here in Guernsey, apparently. Policy & Resources has already ruled out a wealth tax as part of its attempt to plug a forecast £75m. shortfall in States’ finances.

Unpopular as it might be in certain quarters to say so, P&R is right to discount such an approach. In response to a question from this newspaper ahead of the tax review, Frossard House said it was estimated that in 2017 half of personal income tax revenues were generated by the top 15-20% of tax payers.

Move higher up the wealth list and, according to treasury lead Mark Helyar, the top 5% richest pay an incredible 26% of tax take. Based on figures from the 2020 accounts that’s give or take £70m. a year.

Look at it the other way – double the number of rich people living and working here and there’s no need for a tax review at all. No need for GST or a tax on health.

That suggestion is not as far-fetched as it sounds. Jersey, thanks to Covid, has declared ‘an exceptional year’ in terms of high value residents moving in and spending an unprecedented £100m. on property.

The point here is that wealth is mobile – in either direction. Those controlling it have options and choices. The decision to move to, or remain in, Guernsey isn’t solely based on tax but remains an important consideration.

Growing the island’s economy and ensuring it remains an attractive destination for high-earners and the well off remain indispensable elements of how the island balances its books and funds public services.

Attempts to ‘soak the rich’ always backfire – as other jurisdictions have found to their cost.