Employment & Social Security disappointed by dropped proposals in tax package
- Employment & Social Security disappointed by dropped unearned income proposals in social security restructure
- Policy & Resources excluded bank interest, rental income, and dividends from contribution calculations
- Committee believes including unearned income would make system more equitable. P&R fears impact on private rental market and employment.
- The change represents one element of a larger, complex tax package
- Committee will consider its position on the restructure in coming weeks
Employment & Social Security has expressed disappointment after Policy & Resources dropped plans to include unearned income in a major restructure of the tax and social security contributions system.
If included, it would have meant income from sources such as bank interest, rental income, and dividend income would have been liable to social security contributions for employed and self-employed people for the first time.
P&R fears the impact that would have had on the private rental market and the workforce, so wants it reviewed again in 2030 when other measures it wants to take, like introducing a 3% GST, would also be re-examined.
Nick Mann
Deputy Tina Bury, President for Employment & Social Security, said the majority of committee members were disappointed to see the proposals exclude unearned income which were in the previously agreed plans.
"As a Committee, we remain committed to a progressive restructure of the social security contributions system. It therefore won't be surprising that the majority of us were disappointed to see Policy & Resources' proposals drop the element of the previously agreed plans relating to unearned income - for example bank interest, rental income, or dividend income," Deputy Bury said.
The proposed changes would have meant all social security contributions were calculated based on total income rather than earnings alone.
Deputy Bury said this approach would make the system more equitable for all residents.
"It is important to stress that this is only one element of a much larger, complex tax package, and I am not saying the Committee is opposed to the package as a whole - each Member will make their own mind up on that," she said.
Deputy Bury said the Committee would consider its position more fully in the weeks ahead.
Each member of the Committee will make their own decision on the tax package as a whole.
P&R fears that if employed and self-employed landlords became subject to social security contributions on rental income for the first time, they might exit the market, risking supply in an already problematic market.
It could also discourage employment, they said, individuals with significant unearned income (often semi-retired islanders over 50) currently have an incentive to maintain some employment to reduce their overall liability.
It could also make the island less competitive as even more types of income got caught in the States' net.
Q&A
Q: What aspect of the social security restructure was dropped?
A: Policy & Resources dropped the element relating to unearned income, which includes bank interest, rental income, and dividend income, from the previously agreed plans.
Q: Why does the Committee support including unearned income?
A: The Committee believes including unearned income would make the social security contributions system more equitable by ensuring contributions are calculated based on total income rather than just earnings.
Q: Is the Committee opposed to the entire tax package?
A: Deputy Bury stated the Committee is not necessarily opposed to the package as a whole, and each member will make their own decision. The unearned income element is only one part of a much larger, complex tax package.
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