07/03/22

GUERNSEY: Overwhelming political resistance to GST idea.

As published on guernseypress.com, Monday 7 March, 2022.

Political opposition to a GST is intensifying as deputies look towards corporate tax reform as the solution to plugging the island’s financial black hole.

A canvass of deputies’ views on a GST has shown significant resistance to the idea, with corporate tax frequently mentioned as a potential alternative. The Guernsey Press asked all States members to set out their provisional thoughts on a GST with the assumed mitigations, such as a higher personal tax allowance.

The submissions from all 40 States members are printed inside today, and they reveal the extent of the uphill battle facing anyone who proposes a tax on spending.

With the debate still months away, outside of the Policy & Resources Committee there were fewer than 10 members who indicated they could support it, or were ‘open-minded’ to it.

Deputy Liam McKenna called for GST to be ‘taken off the table’, Deputy Yvonne Burford said she would be ‘astounded’ if P&R recommended GST to the Assembly this summer, and Deputy Gavin St Pier predicted it had ‘close to zero chance of adoption’.

Members of the Policy & Resources Committee stressed that no decision had been made, and all options to close the funding gap, including corporate tax, were being thoroughly investigated.

Treasury lead Deputy Mark Helyar said the zero-10 regime needed to be put ‘to the sword’, Deputy Peter Ferbrache said the senior committee did not have ‘a closed mind’, and Deputy David Mahoney said the States debate could be delayed so that all the necessary information on corporate tax reform was available. ‘Personally, I believe the full corporate tax review that has been commissioned with professionals within the industry will take some time, and if that means a delay in bringing the paper then it is a delay worth having, as to get this wrong would have serious consequences for the island.’

One clear theme that has emerged from the responses is that, at this stage, corporate tax reform is considered by many to have potential, as well as taxes that target the wealthier in society.

Deputy Charles Parkinson’s suggestion of a territorial tax regime also seems to be gaining traction.

Another theme is the sentiment that now would be the wrong time for a GST because of the rising cost of living, the war in Ukraine and the predicted impact on energy prices, and the need to nurture economic recovery after Covid.

But one hurdle that P&R has appeared to overcome is that many deputies, though not all, are now supporting or at least understanding the case for higher taxes, rather than cuts to public services.

An area of absolute consensus among the deputies who are willing to entertain the idea of a GST, is that they are adamant it would have to be part of a package of mitigations to help people on low incomes.

However, the lack of a permanent link between GST and the mitigations is seen as a deal-breaker for others.

Analysis of the responses also shows that many States members who are against a GST have strong opinions on the subject.

Deputy Marc Leadbeater said that middle Guernsey would be ‘royally shafted’, and Alderney representative Steve Roberts was concerned it would ‘sound the death knell’ for the post-Covid recovery.

Deputy Aidan Matthews feared it would be ‘destructive’, but Deputy John Gollop believed it could be a ‘dream, not a nightmare’.