New tax reform proposal includes GST for Guernsey

A debate is expected to take place in October

Deputies have been asked to support plans for a Goods and Services Tax (GST) and reforms to social security, alongside £310m of borrowing, by Policy and Resources (P&R).

In February, deputies rejected proposals for a 5% GST, a reduced rate of income tax for earnings up to £30,000, reforms to social security contributions and a £600 increase to income tax allowances.

Politicians have now been shown three options for how future big building projects will be funded.

One of the options is for no borrowing and a "very reduced" capital portfolio, while the other is for £200m of borrowing and a "reduced" capital portfolio.

P&R said the reforms to the island's tax system were needed to plug a deficit which is projected to be £100m by 2040.

Treasury Lead for Policy and Resources Deputy Mark Helyar said he was unsure whether the States would back plans for a GST.

“There are a set of options for deputies and option 1 is the one that does everything.

“It’s the only sustainable option, as the other two options will mean that we run out of reserves.”

It is expected P&R will publish its Funding and Investment Plan on 11 September, after delaying its proposals a month.

All three of the options presented include cost reductions across the States.

Option one is for no borrowing and £190m for a "very reduced" capital portfolio. Option two is for £200m of borrowing and £375m for a "reduced" capital portfolio.

P&R said its preferred option was number three, which included a "full progressive tax package with social security reform and GST, £310m of borrowing and £510m for a "full" capital portfolio.

Paul Dodd who runs electronics shop Soundtrack said he’s reserving final judgement on the proposals until he sees all the details next week.

“We don’t really want GST as it’s a lot of extra work, I can’t see them spending the money in the right places and I am wary of that.

“They’re spending on things people don’t want like extensions to the harbour, and I want to be able to trust I know the money is going where promised.

Mr Dodd said introducing GST would be a “nightmare” for his shop, as he still uses a “basic till”.

“With the way we do our pricing at the moment, it would be a nightmare – we want an electric till but that’s a way off.”

Out in St Peter Port, people were reluctant to support a GST.

Caroline McManus said she thinks GST hits those with less money the hardest, despite any efforts to mitigate the affects.

Taxi driver Barry Harris said he wanted to see a focus on reducing waste before introducing any new taxes.

Mr Harris said “the States needs to get its spending sorted in-house first, our current budget is not on.”

A debate on the plan is expected in October.