It is well documented that the current members of P&R who were in the Assembly during previous consumption tax debates did not support the GST packages proposed.
Speaking for myself, I was never certain that all potential solutions had been fully explored – commonly articulated as no stone unturned. During my 2025 election campaign I stated that if the November 2024 States resolution to introduce a goods and services tax was to be overturned it would require new information or a new solution, to come forward.
That is why, following the election, I was completely supportive of the new P&R’s fresh approach, especially with one of GST’s arch-critics, Deputy Charles Parkinson, as a committee colleague.
Key to this approach was the Tax Review sub-committee comprising experienced heavyweights in the field who looked at potential corporate sources of revenue but also the consequences of corporate tax increases for the island’s financial services industry, the main contributor to our GDP. In their judgement, there is only limited scope for increasing corporate taxes.
My support now is not for GST as previously presented; it is for the 2026 tax reform package – an iterative, softer, blended approach – a Guernsey compromise that has been subject to plenty of challenge from within the committee during its development. The proposed package includes a smaller element of consumption tax than previously contemplated, at 3%, alongside mitigations for most people, public spending savings and other revenue raising measures.
This approach does not leave Guernsey hurtling towards a depleted general revenue reserve by 2031 as a result of the funding gap. It buys time for the States to take stock of semi-unknown emerging elements, such as Pillar 2 receipts (representing a significantly greater contribution from the corporate sector) and progress on developing a wind farm.
The 2026 package also refines and improves the balancing measures to protect the majority of islanders, many of whom are struggling with inflation and rising costs.
On the whole, the majority of households will be better off with this package due to measures such as the reduction in income tax and social security contributions.
And, importantly, it spreads the load better, broadening public revenue from being too concentrated on income-based taxation. Currently, direct taxes, such as income tax and social security contributions account for 77 per cent of revenue. It’s not good practice. The OECD average is 51 per cent.
I take some comfort from this more progressive direction of travel because:
There is a larger contribution from the corporate sector. The 10 per cent rate will be extended to cover the entire profits of all regulated businesses, there will be a modest increase to registry fees and we will introduce an international services entity scheme like the one in Jersey.
There is input from the States resolution to make 1% efficiencies in expenditure over each of the next three years which could amount to £20m. a year by 2029. There is an ongoing commitment to the States priority-based budgeting process, identifying efficiencies and expenditure reduction. This means interrogating what’s really needed rather than nodding through a roll-over or increase of what each committee currently spends.
It encourages and anticipates economic growth, specifically through the recently developed finance centre growth strategy.
It broadens transport tax to capture electric vehicles and high-value private vehicles.
The proposed 3% consumption tax includes raising a potential £5m. from visitors to Guernsey – a largely untapped source.
I understand why some baulk at further taxes and charges in the face of millions lost through mismanaged projects and the perception of too many expensive civil servants. That is in the past. All I can say is that I hope that P&R – and the chief executive – are demonstrating that we mean business in addressing such issues and the focus on that is running in parallel to this important workstream.
I know that some will argue that a 3% consumption tax will be easy to ratchet up in future years, which is why we’re proposing a legislative commitment to compensate any future increase with further mitigations. I also expect that future States members will continue to be cautious about increasing consumption tax without indisputable evidence and we all hope that by the end of this political term there will be better news about Guernsey’s prospects.
Of course there is pain involved in addressing the funding gap but it is important to do so, as an investment in our island’s future.
This package is not a big bang approach. It buys us time to see what transpires from Pillar 2, what progress is made in making a wind farm a reality and what savings and economic growth can achieve. Then there can be an evidence-led assurance review, a thorough stock take after the next election.
GST is no longer the headline here. This package is a far more balanced and a more progressive approach to the economic problem we are facing. I would not support this iterative package of measures if I did not believe that this is the best option for Guernsey at this time.
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