Deputy says GST 'could ruin economy'

Guernsey does not currently have a sales tax but one may be needed

A goods and services tax (GST) would ruin Guernsey's economy, according to south east Deputy Heidi Soulsby.

Deputy Soulsby said GST would threaten small businesses and drive retailers from the island.

She was responding to a report from Prof Dominic Swords who said the mooted tax could unfairly hit residents.

Treasury Minister Gavin St Pier said consumption taxes were the most "economically efficient".

Deputy Soulsby said if the States wants to increase revenue, it should raise taxes on the finance industry.

There is no formal proposal to introduce GST but ministers have said it might be necessary to help the government balance its books.

They are believed to be considering a 5% tax similar to Jersey's, which was introduced in 2008. Neither jurisdiction has value added tax.

Problems

"I think it'll effectively ruin our economy," said Deputy Soulsby.

"It's the small local businesses that will not be able to absorb that increase.

"We've seen the problems it's caused in Jersey and there's nothing to say that won't happen here."

The States of Guernsey collected £25m less in taxes than it spent in 2013.

Prof Sword's report was commissioned by the the Confederation of Guernsey Industry and the Guernsey International Business Association.

He said GST may not be the best way to heal Guernsey's public finances.

"It's not necessarily the best solution mainly because it increases costs," he said.

"It can also have an negative effect on equity and fairness on the population."

Deputy St Pier told BBC News: "Economists around the world will tell you that consumption taxes are the most economically efficient tax and what that means is that they distort economic activity much less than other taxes, like capital gains or wealth."