Business leaders call for end to 'drift' as tax reform vote looms
- Three major business organisations have jointly urged the States to make a decision on tax reform proposals due for debate in July.
- A survey of more than 250 directors found only a third were confident about Guernsey's competitive position, with six in ten concerned about the island's prospects.
- More than nine in ten business leaders agreed Guernsey is at an inflexion point requiring decisive action, with government decision-making speed cited as the biggest constraint on growth.
- The organisations support the proposed 3% GST and broader tax base but raise concerns about whether the package closes the structural deficit and whether public sector savings will be delivered.
- Business leaders say any Deputy voting against the package must show how the same revenue or savings would otherwise be found, warning the island cannot afford another term of drift.
Guernsey's three largest business organisations have issued a joint statement urging the States to approve a tax reform package when it comes to the vote in July, warning that continued indecision has itself become a drag on economic growth.
The Institute of Directors (Guernsey), the Guernsey International Business Association and the Guernsey Chamber of Commerce said the island's business community would rather see a credible package agreed than the question deferred into another political term.
The joint position follows nearly two decades of debate over how to fund Guernsey's future and responds to the Policy & Resources Committee's tax reform policy letter, published on 8 June.
The statement is based on evidence from the IoD's recent "Unlocking Economic Growth: Guernsey's Competitive Future" programme, which surveyed and consulted more than 250 directors and business leaders.
Asked how confident they were that Guernsey is competitively positioned to support sustainable economic growth over the next five years, only around a third of respondents said they were confident. Approximately six in ten said they were concerned, with "quite concerned" the single largest response.
The message on timing was more emphatic. More than nine in ten agreed that Guernsey is at an inflexion point requiring decisive action, with around half agreeing strongly. Fewer than one in ten thought the urgency of change was overstated.
When asked what is most holding the island back, the single most-cited constraint was government decision-making speed and ambition, ahead of housing and skills. This was followed closely by the absence of a clear long-term economic direction.
"In other words, the island's business leaders identify indecision itself as a brake on growth," the statement said. "That finding should weigh heavily on every Deputy as they approach the July vote."
The IoD's Directors' Economic Confidence Survey shows that confidence in the local economy remains subdued but materially stronger than in comparable jurisdictions, well ahead of both the UK and Jersey. Directors are more optimistic about their own organisations than about the wider economy.
On the fiscal question, survey respondents favoured a spending-first approach, with restraint, a credible plan for economic growth, a review of public services and closer working with Jersey accompanying any move to raise taxes. Where new taxation is required, they identified GST as the preferred mechanism, ahead of higher income or corporate tax.
The three organisations said the Policy & Resources package aligns with many of these priorities. It broadens Guernsey's tax base rather than leaning harder on working people and local businesses, they said. The decision to introduce GST at 3% rather than 5%, with protections for lower and middle-income households and a reduction in the standard income tax rate, reflects a genuine effort to soften the impact.
The inclusion of public sector savings alongside revenue measures acknowledges the spending-first principle, they added. The commitment to an assurance review in 2030 is a sensible mechanism for testing the real-world impact of the measures and adjusting course.
S&P reaffirmed Guernsey's stable outlook earlier this year and explicitly anticipated a suite of tax reforms, including a GST, from 2028 to strengthen and diversify the revenue base.
However, the organisations raised three areas where harder questions remain. The first concerns the size of the gap and what fills it. According to the Committee's own analysis, the package does not by itself close the structural deficit, and members are entitled to understand what fills the remainder and how much of the plan rests on revenue streams such as offshore wind and Pillar 2 receipts that are not yet certain in timing or scale.
The second concerns the deliverability of savings. "We have consistently said that spending discipline must travel alongside taxation, not behind it," the statement said. "The credibility of the whole settlement depends on public sector savings being delivered and demonstrably tracked, rather than quietly eroded once the revenue measures are in place."
The third and most important concern is growth. The policy letter acknowledges that relying on economic growth to resolve the island's challenges is high risk because growth depends on factors beyond the States' control.
"We agree. But that is precisely why the growth agenda cannot be the part of the plan that is left to chance," the organisations said. "Taxation can stabilise the public finances; only growth can ultimately sustain them. A fiscal settlement that balances the books while doing nothing to strengthen connectivity, housing, and the island's competitiveness would solve the smaller problem while leaving the larger one untouched."
The statement warned against treating rejection as a safe option. Nearly twenty years of unresolved debate have themselves become a drag on confidence and investment, it said.
"'No' without a credible alternative is not a decision; it is a deferral, and a costly one," the organisations said. "Any Deputy minded to reject this package carries the obligation to show how the same revenue or savings would otherwise be found. The island cannot afford another term of drift."
The IoD, GIBA and the Chamber said they would remain independent, evidence-led voices for Guernsey's business community, willing to support government when the direction is right and to ask hard questions when needed.
"The analysis has been done. The options have been weighed. The business community has been consulted through the IoD's recent economic growth work, and has spoken," they said. "Nine in ten respondents say the island is at an inflexion point, and they name indecision itself as one of the greatest threats to growth. It is time to act."
Q&A
Q: What are the three organisations calling for?
A: The Institute of Directors (Guernsey), the Guernsey International Business Association and the Guernsey Chamber of Commerce are urging the States to approve the tax reform package when it comes to a vote in July, rather than deferring the decision into another political term.
Q: What did the IoD survey reveal about business confidence?
A: The survey of more than 250 directors and business leaders found that only around a third were confident about Guernsey's competitive position over the next five years, whilst approximately six in ten were concerned. More than nine in ten agreed the island is at an inflexion point requiring decisive action.
Q: What concerns do the business organisations have about the proposals?
A: The organisations raised three main concerns: whether the package closes the structural deficit and what fills the remainder; whether public sector savings will be delivered and tracked rather than eroded; and whether the growth agenda will receive sufficient focus, as taxation can stabilise finances but only growth can sustain them.
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