VAT cut would see other taxes rise, minister says

Alex Allinson said the island's VAT sharing agreement with the UK made up 28% of of the government's income

Reducing VAT rates for the hospitality industry would see a "significant loss of government income", the treasury minister has warned.

Last week, the Licensed Victuallers Association (LVA) called on politicians take action to help pubs, bars, restaurants and hotels on the island.

Speaking in the House of Keys, Alex Allinson said reducing VAT rates for traders would require taxation hikes elsewhere or could risk "sudden cuts in frontline services".

But he said he and Enterprise Minister Tim Johnston were committed to meeting with LVA representatives on Monday to listen to their ideas about "sustainable solutions".

The island's 20% standard rate mirrors that in the UK, and national VAT data is used to calculate the share of indirect tax revenues the island receives from the UK under the Final Expenditure Revenue Sharing Arrangement.

Dr Allinson said that agreement was "crucially important" as it made up about 28% of the government's income.

He told the House of Keys it been estimated that every 1% reduction in VAT for hospitality businesses would cost the government about £2.5m in revenue annually.

'Frustration and despair'

Chief Minister Alfred Cannan was also quizzed about support for the industry during an urgent question on the issue by Jason Moorehouse MHK.

Mr Moorhouse said he was concerned the island's leader had not "grasped" the "frustration and despair" felt by those speaking out.

In response, Mr Cannan said the government understood parts of the sector were “experiencing a challenging period” but any action would have to be "proportionate and consider any further impact on wider society".

Mr Cannan said the government's role was to create the "economic framework for businesses to succeed" but the treasury and enterprise ministers would "go and listen to concerns and explain the current thinking" at the planned meeting.

The government would then consider "where and what we can do to try and support the business concerns" expressed, he added.