New approach to tax should include GST

1) An over-reliance on direct taxation for government income from that proportion of the population who are working and paying income tax. This proportion is getting less with increasing age and with the current immigration policies of the present States.

2) Our public services are being progressively starved of money. Health is significantly underfunded and this worsens year on year. Waiting lists lengthen, nurses are in short supply and equipment replacement is delayed. Education needs substantial investment in buildings and increased funding for salaries, particularly teachers. Our transport links need larger subsidies if we are to recruit and retain the people we need to run our industries and our public services. Then there are roads and coastal defences, the list is long.

3) The States continually try to compensate for the absence of GST by loading large tax increases onto cigarettes, alcohol and fuel, this is not only unfair but counter-productive as these sources of tax are getting less with the passage of time. The large increases in TRP are equally unhelpful and are leading to considerable problems for some people, especially the elderly.

The usual arguments advanced against GST are as follows:

1) Some people say that GST is a regressive tax, by which I think they mean that it affects low-income groups proportionately more than high earners.

2) Indirect taxes are seen as inflationary.

3) There is a widespread view that Guernsey politicians will see the GST rate as a soft target and try to raise it each year instead of running their departments efficiently and well.

My argument regarding the first is that the only purpose of taxation is to raise money for the provision of essential public services and that it should be set at whatever rate is required to achieve this. Taxation should not be used for social engineering. Those in our society who need financial support should find it readily available through the Social Security system, and the introduction of GST would require this support to be increased to compensate. This would not include all pensioners, many of whom are well able to support themselves, but it would include some.

The problem of inflation is real, but evidence from around the world would suggest that the effect of the sort of levels we would require (probably 5%) would be modest and transitory.

In relation to politicians, there are members of the States who are financially competent and able to balance their budgets; they should be supported and more of the same elected. Since the debate in 2015, however, there has been a lack of political will and courage to stand up and explain to the people of Guernsey that provision of the public services that they need and want requires changes in the tax system. This is not a popular subject, like all taxation issues, but it will have to be confronted, and soon, as has happened in nearly every country in the world. Jersey has had GST at 5% for the last 10 years, to its considerable benefit. The Guernsey States report ‘Planning a Sustainable Future’, appended to the Billet in March 2015, needs to be re-read in the light of our experience of another four years of cost-cutting and a new approach evaluated. This debate needs to be had again.

nige@cwgsy.net

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