13/08/21

JERSEY: GST rise ‘unlikely for some time’.

As published on jerseyeveningpost.com, Friday 13 August, 2021.

Jersey is in ‘no rush’ to increase GST or any other taxes, with its finances less damaged by the pandemic than was initially feared, the Assistant Treasury Minister has said.

Following the recent news that Guernsey may need to introduce its own version of the sales tax, at a rate of 8%, to pay for its pandemic costs, Deputy Lindsay Ash said that Jersey had ‘no need to panic’ and that Islanders would not face similar tax hikes.

He said that the Island had been in a stronger financial position going into the pandemic than its neighbour, a situation which was partially due to the introduction of GST 12 years ago. It was introduced at 3% and later increased to 5%.

‘I don’t want to point-score with Guernsey but they are in a hell of a worse position than us,’ he said. ‘As memory serves, when this all started, they had a strategic reserve of something like £100 million and ours was about £900 million.

‘We were with our reserves in that position partly because we [introduced] GST and various other taxes when they chose not to, which is fair enough.’

He added that Jersey’s economy and finances had performed better than Guernsey’s during Covid-19.

‘Their losses were probably slightly higher than ours, in some ways because they kept their borders shut pretty much throughout and partly because they don’t have quite the tourist industry that we do. We did financially help certain sectors of our economy but a lot of the sectors of our economy, such as the finance industry, were largely unaffected, partly because we have top-rate internet connectivity as well.

‘Obviously our hospitality sector and events sector took a battering and that has incurred a cost, as did building a Nightingale Wing which, fortunately, we never had to use. The PPE side of things was fairly heavy, and then we had the vaccines and we’ve had the testing at the Airport, so there have definitely been costs.

‘But have we been hit as badly as we thought we would be financially? No, I think it is fair to say we haven’t,’ he added.

Deputy Ash said that it was ‘not set in stone’ that there would be no new tax hikes for Jersey but it was very ‘unlikely’ to happen during this term of office.

‘I certainly don’t see there being any tax rises before the next general election and, to be honest, for some time after that,’ he said. ‘There are so many areas of taxation here that we don’t touch and that really we have no great desire to touch. I don’t think there’s any appetite in the Treasury to dream up any new forms of taxation.’

He added that Jersey’s position was helped by it strong cash reserves, which are handled by investment managers and can generate growth of between 6% and 8% per year.

‘If you put in our Social Security fund and a few of the other funds, together with the rainy day fund [Strategic Reserve], we’ve got well over £4 billion in reserves.

‘That is unlike the rest of the world who are in substantial debt and put themselves in even further debt during the pandemic. We just haven’t done that so there is no rush to put up GST and there will be no rush to put up any taxes. There’s no need for us to panic,’ he added.