A modest rise in income tax is more suitable than GST

JUST to add to the point made by Mr Hockey [GST a ploy to soften us up for increase in other types of tax, 30 August 2021], although, under the terms so far announced by P&R a business with turnover of under £300,000 would be exempt from adding GST to its sales invoices, the other half of that position is that it would not be able to recover the GST it would pay on its purchases. It costs would therefore rise by whatever the rate of GST. To compensate for the reduction in profitability, the business would need to raise its sales prices by at least the effect of the cost of the GST it has had to pay. If selling to a GST registered business it would then be at a competitive disadvantage against someone else who is registered for GST whose pre-GST prices would not have risen.

The ramifications are hard predict but a GST will tend to skew the economy.

It has been said GST will cost the States £800,000, presumably annually, to administer. That sounds an unbelievably low estimate and does, of course, ignore the cost to all the island businesses that will have to do most of the work as another administrative burden.

It will, however, be a justification for not reducing the size of the States bureaucracy.

What will be the effect on the post office of having to collect GST on all the parcels that come flooding in to the island every day?

One can imagine lots of work for lawyers from the establishment of GST tribunals to work out the details of the rules.

Deputy Helyar, in his otherwise excellent interview in your podcast, said that by introducing GST Guernsey was merely doing something that other jurisdictions had already done. Surely the point is that it gives us a competitive advantage to be different and to voluntarily give that advantage away is akin to commercial suicide?

There was an excellent report produced by a respected professor of economics for various Guernsey business organisations some eight years ago which set out in great detail why GST is a thoroughly bad tax and why is does not actually ‘broaden the tax base’. The elderly will be sheltered through rises in pensions and other allowances, as will the young and less well off. International business will be exempt, leaving the burden to fall mostly on the same group of islanders as an increase in income tax, otherwise know as the Health Tax. The only difference will be a modest amount collected from tourists and visitors who will wonder at the high prices they are paying.

Deputies should remember their manifestos, which are only 12 months old, and look at a modest rise in income tax, which would have a zero administrative cost, together with a cold, hard look at expenditure.


St Jacques House

St Jacques

St Peter Port


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