Yes. In my opinion, when viewed through the lens of a credible alternative to consumption taxation. But sufficient numbers of the electorate swallowed the proposition, ousted several standing deputies who had the courage to support GST-plus and installed several existing or new candidates who subscribed publicly to ‘fair tax’. The most vociferous among them was Deputy Parkinson, who presented his belief in territorial tax as the bedrock of fair tax, created the fairtax.gg website and convinced a number of other deputies and some candidates to feature on it, more of which in a moment.
But now he has recanted his staunch opposition to GST-plus following (yet another) consultants’ report, saying GST is inevitable. ‘While we can make some useful improvements to the corporate income tax system in Guernsey, in the long run, Guernsey will need a GST’, he said, when questioned on Radio Guernsey. A bit like the apostle, Doubting Thomas, who insisted on seeing the wounds in Jesus’ hands before accepting his resurrection, Deputy Parkinson refuted the need for a consumption tax many times in the last term. He went so far as to successfully remove the P&R of the time on the basis that they had not been able to secure support for their ‘flagship’ policy – which was true, they didn’t – and it took another debate, another P&R and a successful amendment to finally secure a majority in favour of GST-plus.
Each time the debate was had of course, he duly trotted out his belief in a territorial tax and was himself defeated several times, and here we now have another set of consultants and a P&R (most of whom had never supported GST-plus before either), essentially being told that GST-plus 2.0 is the only route with any possible chance of making a dent in the structural deficit, which they themselves have now ramped up to £95m. per year. This as a consequence of increasing the infrastructure commitment under the fiscal rules to 3% (which seems to have been overlooked in the tax report). Given that Deputy Parkinson insisted that the then P&R ‘dies by the sword’ of its support for GST-plus, I wonder whether he himself will choose to die by the now fully-debunked, sword of territorial tax himself?
But he was not alone in supporting territorial tax in the last term, as indeed were several members on his (no longer available) fairtax.gg website. Deputies Tina Bury, Adrian Gabriel, Gary Collins and Jayne Ozanne all featured prominently. Deputy Marc Leadbeater spoke very much in favour of it during his GP podcast interview, claiming territorial tax wouldn’t affect the big players locally. They all got voted in last summer. Deputy Ozanne even did a series of videos on social media lauding its merits. You can see all of this in detail on my website in the podcast I did at the time entitled Will Parkinson And The ‘Fair Tax’ Candidates Crash The Economy?’ It has received over 850 views. But clearly, the electorate at large put their faith in Deputy Parkinson’s ‘fair tax’ proposals and he came third in terms of votes cast. I wonder how they are feeling now having heard him admit that a consumption tax is inevitable?
But of course, a territorial tax might have been his centrepiece, but he also made claims about the revenue riches that would arrive as a consequence of the Pillar 2 international tax developments. At first blush, the original expectation of that being £10m. now rising to £40m. appears to have some merit, according to the consultants. But there are several caveats in their report: ‘Nonetheless, while it [Pillar 2] is expected to deliver significant increases in revenues for the Bailiwick, there are credible reports that its application has also created some loss of business. Both the short and long term consequences are still to play out. Until the first round of reporting is completed in 2027, Guernsey cannot be sure how much revenue it will gain or how much economic activity it will lose in the short term as a result of its application.’
What is not mentioned in the report is the further reality that if Pillar 2 imposes an international ‘standard’ of remitting 15% tax on profits wherever in the world a business chooses to site itself (excluding the US which has not signed up to it), then the attendant costs of operating in a jurisdiction will become a far more critical issue. Essentially, if Pillar 2 levels the playing field, the unintended consequences are likely to be ensuring that overhead costs are minimised – and a very significant factor of operating out of Guernsey are staff costs, very much heightened by the impossible cost of housing. This may well be why the consultants express caution about the actual revenues that may eventually arise from its introduction.
But what of the ‘all new’ tax proposals?
Well, I doubt anybody will believe that a 3% GST has any sort of shelf life. We are told that it won’t change until the much-referred to 2030 Assurance Review. This presumes of course that this P&R survives the tax debate itself and, of course, that circumstances do not materially deteriorate in the meantime due to not seeking the original 5%. For example, the ‘cliff edge’ of 2032 (when our reserves have been burned through) first demonstrated during last term has now been shortened by a year to 2031. The overhead costs of introducing a 3% GST are much the same as for 5%, but represent a greater proportional cost to administer, due to the smaller amount of revenue generated – to whit, actually increasing the related cost of government at a time when we are told ‘efficiencies of a cumulative 1%’ are being actively sought. Similarly, the amount of people at the very lowest end of the income scale is now reduced, by having lowered the applicable 15% income tax rate to £28,000 instead of £33,550.
We also have some sort of ‘Muhammad Ali shuffle’ going on with proposed transport taxes. Most particularly, re-introducing vehicle-ownership taxes while reducing fuel duties. We are told this will penalise EV and hybrid vehicle owners or those using their petrol or diesel vehicles less (arguably those doing their bit for the environment). That sounds counter-intuitive at best and unfair at worst. With all of the hoopla espoused by the States over a transition to much greater EV use to complement the net-zero contradictions on emissions, this does seem to be yet another attempt to simply deter islanders from using their vehicles at all, while seeking to extract as much as possible from them in tax. Conversely, drivers using petrol or diesel cars, including families and those living outside urban centres are likely to be advantaged. Counter-intuitive doesn’t really begin to describe the mixed signals, let alone the divisive ramifications of what you choose to drive to suit your own circumstances, or where you choose to live. Presumably, cycle tax wasn’t even considered, despite its increasing use of the same road network.
What of the third leg of this tax stool – efficiency savings? When the amendment to first introduce this cumulative 1% was agreed earlier this term, many of the committee presidents expressed considerable doubt as to their ability to achieve it, but most still opted to agree, presumably not wishing to be seen to actually oppose such a suggestion. A 1% ‘saving’ of course is readily eaten up by inflation, but because it is cumulative, it amounts to something closer to 4% eventually over the life of the Assembly. That too will be eaten away by inflation – if indeed the Assembly can get anywhere near that level of efficiencies across committees – not even necessarily evenly across each committee, as is explained. Indeed, both HSC and ESS are committing to look at their budgets (being the highest) but not expecting to see any tangible outcomes before 2030 when it becomes the responsibility of the next Assembly. While not underestimating the considerable work involved, the importance of finding government savings while introducing additional taxes should mean we don’t permit such can-kicking, especially given any savings (or likely reductions in provision), will be immensely unpopular but highly necessary, especially when GST 2.0 raises far less over the same period.
That these proposals are an attempt to reduce the inflationary impact of introducing a very necessary diversity into our overly-dependent taxation regime upon earnings is to be welcomed. But this indeed was already the premise of GST-plus a number of years ago, and all of the current P&R (with the exception of recent addition Deputy Niles) would have none of that rationale last term – and may well have been re-elected because of it. It seems all’s fair in love and war, but not necessarily when it comes to politics and taxation.
