Guernsey tax review to be presented to States in September

Three options have been outlined to deal with financial challenges going forward

Three options for changing the tax system in Guernsey have been announced.

The Tax Review was carried out against the backdrop of both immediate and long-term financial pressures, the Policy & Resources Committee said.

Three possible plans will be put to the States of Guernsey for debate in September

The committee said the current tax base is unsustainable and changes must happen going forward to raise revenue.

The three options outlined will be included in a policy letter published in August 2021 for debate in the States on 29 September.

Deputy Mark Helyar, Treasury lead for the Policy & Resources Committee, said: "Our current tax base is unsustainable.

"The number of older people in our community is increasing and so is the volume of pensions and care services they need.

"We also need a long-term solution to support investment in our Islands' infrastructure.

"Change is needed, but the question is, what will that change be?"

The States will assess the three proposed options and "provide direction as to the path that we should take," he added.

Each of the three options include the assumption that additional revenue will be raised through changes to the corporate tax system.

Three options put forward by the Policy & Resources Committee

Option 1:

• Apply an income-based health tax at 3%; and

• Change the Social Security contribution system so that it is fairer and more progressive and use this to raise more money.

Option 2:

• Apply a Goods and Services Tax (GST) that will gradually increase to up to 8% with mitigating measures to protect low-income households;

• Increase the personal income tax allowance; and

• Change the Social Security contribution system so that it is fairer and more progressive but without raising any more money.

Option 3:

• Apply a Goods and Services Tax (GST) that will gradually increase to up to 5% with smaller mitigating measures to protect low-income households;

• Make a smaller increase in the personal income tax allowance; and

• Change the Social Security contribution system so that it is fairer and more progressive and use this to raise more money.

Follow BBC Guernsey on Twitter and Facebook. Send your story ideas to [e-mail].