'Governments should raise tax like Isle of Man'

The Isle of Man is the first Crown Dependency in the British Isles to raise income tax to 22%

The Channel Islands should follow the lead of the Isle of Man in raising income tax to boost public funding, a leading accountancy firm says.

It comes as plans to increase personal income tax from 20 to 22% for two years, have been proposed by Guernsey States as a way to stabilise public finances.

If passed, Guernsey will follow Crown Dependency the Isle of Man, where a similar 2% rise in the higher rate of personal income tax was introduced in April to generate a £20m boost in health spending.

Martin Katz, Director of Katz & Co, from the Isle of Man, says the move has been broadly welcomed by islanders there.

“It’s a matter of necessity - we live on islands that need to balance the books and so in one way or another the governments need to do that," said Mr Katz.

“While none of us like it, it’s necessary to raise more revenue otherwise we are going to go bust. We need to sustain our islands for the future and take a long term view.”

'Difficult unpopular decisions'

Earlier this year Guernsey States revealed it is facing a £24m deficit in public revenue by the end of 2024, casting doubt on spending plans.

Policy and Resources (P&R) said the personal tax hike would generate £34m a year and secure the future of capital investment projects.

Meanwhile P&R President Lyndon Trott said a £1,100 rise to personal income tax limits would also protect the "lowest income households".

Isle of Man Minister for Treasury Hon Dr Alex Allinson is hopeful Guernsey will follow suit, but cautioned that getting the right public messaging about how that money will be spent, is key.

He said: “When you ask people whether they would be prepared to pay more tax from their income for essential services they say yes, but I still got a huge amount of opposition when it came in.

“All of our countries are having to make difficult, unpopular decisions so the thing is to communicate them properly to make sure they are the right decisions for the future prosperity, not just short term.

“Looking at the proposals that are coming forward I think Lyndon Trot is absolutely trying to do that.”

Opposition

In Jersey there is also a growing campaign for similar measures.

Reform Jersey Party Leader Deputy Sam Mezec described the proposed 22% income tax raise in Guernsey as a “bold” move.

He said his party had long supported income tax reform as a way to shore up the funding of public services.

He said: “We do favour raising income tax for the highest earners in Jersey.

“The current system is decades old and it isn’t doing for public revenue what we need it to do.”

He added his party will be looking to Guernsey to learn lessons from the increase, should it get the go-ahead.

The States of Guernsey will meet on 5 November to debate the proposals, which have already been met with some opposition.