Summary of States Fiscal strategy review for personal taxation from Jersey States website, including a link to the Consultations Questionnaire
The states are predicting a deficit of as much as £100m by 2013. In order to counter this they are proposing a combination of reduced states spending (savings of £50m) , economic growth (economy is expected to start growing in 2011) and raising existing taxes (raising £50 – 60m) on the basis that it is easier and cheaper to raise existing taxes than create new ones.
Controlling spending – all they state is that Ministers will need to reconsider their departments priorities and control their budgets better – not really very convincing.
Jersey don’t want to borrow or to use strategic reserves to fund the recurring deficits as this is not a long term solution.
The intention is to maximise tax from businesses without jeopardising competitiveness.
The options involve increases in
• Goods and Services Tax – increase to 5%
• Social Security contributions – increase ceiling to £115,000
• Domestic property rates – to triple (average UK poll tax is £1,100 compared to Jersey’s £350)
• Income tax – 30% on income above £100,000 (85% of households earn 81k or less)
Raises to GST and Domestic rates are favoured even though mildly regressive as they don’t hinder economic efficiency or island competitiveness.
GST
An increase does not affect competitiveness – exports are excluded – but impacts lower income households more. Excluding food and fuel would be complicated and expensive to administer and would mean an increase to 5.8% would be needed to achieve tax revenues.
Social security
Increases would not put us out of line with our competitors’ in the Finance industry (a significant proportion of Jersey’s income comes from the finance sector and its staff), however this would add to employers costs and firms may respond in cutting costs elsewhere leaving people out of work.
Domestic Property Rates
By tripling rates this would generate an additional £30m for the states. Lower earners will again pay a larger percentage of their income on them however in general those households that are better off have bigger houses. Administration is likely to be complex and may require the introduction of new benefits for low income households.
Income tax
By introducing a higher rate of income tax – 30% for income over £100,000. This would raise about £30m for the states.
However, this could mean the loss of some highly skilled workers affecting all islanders.
We presently benefit from relatively high levels of corporate tax per person which means the level of personal tax we pay is comparatively low.
Other options being considered:-
• Raising impot duties
• Raising stamp duty – including the new land transaction tax for share transfer properties
• Removing mortgage relief – as people factor this into the cost of buying a house anyway so keeps house prices higher
• Land development tax – taxing profits following the rezoning of land for development
The timetable is as follows:-
• 30 August – Public consultation ends
• 13 September – Consultation results published
• 26 October – Budget proposals lodged
• 7 December – States debate budget proposals
Click here for online Consultations Questionnaire .