Guernsey Press

Another layer of tax on tax

He’s trying to keep an open mind about GST, but Horace Camp has a few concerns.


I AM a simple man with, in modern terms, very little education, having left school at 17 and never taken an examination since then. Not even a driving test.

Therefore I can’t wait for the States of Guernsey to educate me about the benefits of a goods and services tax. I’m sure there must be many others like me who can’t wait to see £20,000 plus officers’ time spent on bringing us up to speed on GST.

In the meantime, my head is spinning trying to imagine just how it works. I do have some practical experience of the UK’s value added tax having been VAT-registered when I was a farmer on the mainland. But as everything I sold was exempt, and as I could reclaim all the VAT on the goods and services I received, then I used to receive money from the VAT man and not actually pay him anything.

I fear that’s not how it will work for me in Guernsey.

I wonder what impact it will have on house prices, which seems to be one of the reasons why GST is required. Let me explain my cock-eyed reasoning. We need GST because as our workforce shrinks due to age then we need to collect more tax in a different way to pay for the care of the ever-increasing old population. One of the ways we could stop our workforce shrinking would be to encourage more young people to live and work here.

Anecdotally we are told that the unaffordability of homes discourages the young from making a home in Guernsey. I assume GST will be applied to the services supplied by advocates and estate agents, making house purchases even more expensive? Looking forward to having that one explained.

And I suppose young people still like to go gallivanting about and enjoying themselves with their drunken frolics. At least drink will be taxed a great deal more, with GST even being applied to the tax already included in the price. Come to think of it, all the sinful products except for illicit drugs are loaded with taxes one way or another.

Imagine a public house. All the products it sells have already paid duty. Then the commercial TRP paid has to be shared proportionally between every drink sold, as does the staff’s income tax and insurance payments. In fact an awful lot of taxes influence the price of a pint of beer and then along comes GST and adds another layer of tax on tax. Ingenious really.

I assume there will be a GST turnover threshold under which a business will not have to register, but if it is minimal like the UK’s £85,000 then I suggest that many micro businesses will still register just because they don’t want customers to realise just how small their business is.

And then we come to the issue of online shopping off-island. I’m sure Deputy Helyar will do his utmost to ensure that GST is applied to goods ordered from Amazon. But who will collect the tax for us? Will Amazon change its system to accommodate our wishes and become our tax collector? Or will goods be taxed as they are received on-island and not released until the tax is paid?

I assume even if online goods are taxed there will be a lower limit before tax is due. I hope so. I quite like having a can of cream of chicken soup delivered to my door next day for 70p and I wouldn’t want to pay 5.6p tax.

I do like the idea that we can tax visitors who will never benefit from the taxes they have paid, leaving more for us oldies to enjoy in our declining years. Just the tax on those enormous Aurigny fares will bring in a fair old bob or two. And of course all the tax on tax on the booze they will be consuming.

I’m looking forward to Deputy Hels explaining to us that GST is a fair and equitable tax. On the face of it, it seems to be unfair, what is called a regressive tax.

Let me explain my concerns. If someone with the arse hanging out of their trousers (should any millennial be reading this by accident, that translates as a person of limited means) spends the same on an item as one of our tax-capped super-rich residents then proportionally the one with the draughty rear end pays a greater percentage of their income in tax.

Undoubtedly the rich will pay more tax, but it will equate as a lower percentage of their earnings compared to the poor. And of course the poor will spend all their income and be taxed upon it while the rich will squirrel much away, which will not attract GST.

I also wonder how the States will keep their costs down once GST is implemented. I may be wrong and totally underestimate the public sector’s desire to be good citizens but I have this niggling fear that if, say, an 8% GST is applied, the unions will demand an 8% rise, which will eat up a fair chunk of the new tax raised.

I also wonder if implementing GST when inflation is rising anyway is a good idea. I can imagine a near future where public service salaries are 15% higher than today. I’m looking forward to being educated on that one. Possibly a wage freeze instigated as GST is introduced?

Perversely, I’m not against GST if it is implemented fairly and I was, eventually, a supporter of the Deputy St Pier vision for GST, which is quite different to Deputy Helyar’s. Gavin suggested a GST which would not be designed to raise more taxes in total but principally was designed to diversify the source of tax and to spread the tax burden more fairly.

This would be achieved by raising tax allowances for the lower paid and effectively leaving them with more money in their pockets than they would need to pay in GST on their purchases. This would have turned a regressive tax into a progressive tax by linking its impact to earnings.

I’m not sure the new scheme will be quite so altruistic, but as always I have an open mind and I’m waiting to be convinced by the marketing campaign. Which will not be easy because I used to be in marketing and used every trick in the book to accentuate the positive message and totally eliminate every negative aspect of the product being pitched.

However, I suppose with the States being known for its open and transparent integrity when communicating with us, perhaps I shouldn’t be so sceptical?