Guernsey budget proposes to take £12m more from finance

Deputy St Pier said he intended to phase out mortgage interest relief

Some insurance and fiduciary companies in Guernsey will be charged 10% corporate tax from 1 January, if States members approve budget proposals.

Such companies have been exempt from corporate income tax since 2008, when the Zero-10 tax regime was introduced.

Deputy Gavin St Pier, the Treasury and Resources minister, said he anticipated the move would raise an extra £12m.

His budget report, published earlier, also proposes a phasing out of mortgage interest relief by the end of 2020.

Deputy St Pier said the annual cost of this relief was £8m, which could no longer be justified.

"It is, in essence, a subsidy from all taxpayers to a smaller group of taxpayers - those that are currently in the process of buying their own home," he said.

"The net effect of that... is to support and increase the housing market, which isn't necessarily a good policy outcome in an environment where we already have high property prices."

The average price of a local market property in Guernsey was £445,326 in the third quarter of 2012.

Tobacco up 6%

Many of the other measures proposed in the budget are neutral.

It is suggested that taxes on alcohol, fuel and property should rise by 3.0%, in line with the Guernsey inflation rate for September 2012.

Personal income tax allowances would also be increased by the same figure.

However, an increase in the rate of duty on tobacco of 6% will be put forward.

Guernsey's deputies will debate the budget at a special sitting of the States on 12 December.

The Treasury and Resources Department had hoped to debate the budget earlier in the year, so that it could be discussed alongside the annual changes to benefit rates.

However, the department was unable to complete its work in time for this to happen.