Proposed open market tax would be discriminatory

However, not only would a special ‘open market tax’ be discriminatory and infringe human rights legislation (already embedded in Guernsey legislation) it would also target those living in open market properties who are locally-qualified residents. Many locally-qualified residents have bought lower-end open market properties as their homes or inherited them from other locally-qualified residents.

With an average open market house costing £1m.-plus this would equate to £10,000-plus per property, per year. Some residents of open market are asset rich (property) and cash poor; these individuals are not able to downsize as there are not the smaller (cheaper) open market properties available.

Additionally, there are more than 150 open market multi-occupancy (six residents) Part D properties. The tax would be penalising these owners and tenants, who are essential to run our public, professional and hospitality services. They would, disproportionally, pay a very high tax rate per property which would further drive them away.

This tax could well equate to a significant percentage of someone’s income.

There is already a tiered document duty, so higher value properties already incur a large duty bill, as well as the recently introduced extra document duty of 2% on second-home ownership.

Guernsey has introduced a ‘tax cap’ regime to encourage people to relocate, as the States recognises that Guernsey needs these individuals in the short, as well as long term, for the funds and economic benefits that they will bring in to island.

The proposed tax amounts to a wealth tax, removing one of Guernsey’s unique selling points and would be hugely damaging to Guernsey’s reputation for reliability and stability.

Deputy Mark Helyar, as the treasury lead on Policy & Resources, recognised the contribution that the open market makes to Guernsey’s economy in his statement to the Guernsey Press on 4 August 2021, entitled ‘Wealth Tax could scare off those who pay most’.

He was reported as stating that: ‘Policy and Resources want to protect this sector because of its importance to the overall tax take. It’s (P and R’s) review found that the wealthiest 5% of island residents contributed 26% of the tax take, while low and middle-income households, which make up some 60% of the population, together contribute 26%.’ He also stated that ‘a wealth tax is a tax on capital, it’s not a tax on liquidity, so you may be asking people who are retired and living in an open market property, and who don’t have a very substantial income, to find a substantial amount of money because their wealth is high and their liquidity is low. I think it would be very detrimental to the structure of our population at the moment, we would scare away a lot of our high-earners who are paying the majority of the tax we benefit from… even if just one of the island’s richest residents left the island, it would leave a big dent in public finances’.

Turning to open market residents’ tax burden on the States. Many residents in the open market present a very low tax burden on the States of Guernsey as they have private health care and many of their children attend the colleges or off-island schooling, saving the States more than £10,000 per child per year.

A previous well-publicised intervention in 2011 led to a 10-year downturn in relocations and sales in the open market. Mr Hands’ intervention in this debate will only serve to drive current existing open market residents away from Guernsey, taking their wealth and taxes with them. It also risks making others who are considering relocating to Guernsey rethink their destination.

It should also be noted that the open market residents can never become locally qualified, unlike licence holders or, for that matter, relocating EU residents with settled status who are permanent upon arrival. The rules for children of open market residents are also discriminatory.

OPEN MARKET FORUM