GST-based tax reform proposals published ahead of June decision
- The Policy & Resources Committee has released its latest proposals related to tax reform.
- They outline a package including a 5% GST including on food and personal income tax cuts.
- These proposals include protections against potential future GST increases.
- Other options, including corporate tax reform, are still being reviewed.
- A final decision will be made in June.
Policy & Resources has published a policy letter outlining proposals for tax reform based around a GST.
Work is also continuing on alternative options with a final big picture decision by the States set for June.
This package includes the introduction of a Goods and Services Tax alongside reductions in personal income tax and measures to support lower-income households.
Key components of the proposed reforms include a reduction of the standard personal income tax rate to 15%, with a higher rate of 20% applying to income above £32,400, which will be adjusted for inflation.
The proposals also aim to introduce a social security allowance that matches the personal tax allowance, leading to lower social security contributions for most residents.
The introduction of a 5% broad-based GST on many goods and services, including food, is another major aspect of the plan, though there may be a small number of exemptions.
In addition, the proposed reforms include raising pensions and benefits to counter the impact of the consumption tax and creating an Essential Costs Relief Payment worth £520 annually for single adults, or £860 for couples, to support low-income households not qualifying for other income support.
The policy letter further intends to establish legal protections requiring that all allowances, thresholds, and benefits be adjusted accordingly if increases in the GST rate are proposed in the future.
The possibility of instituting a super-majority requirement in the States for any future GST increases is also under consideration.
Deputy Gavin St. Pier, Vice-President of the Policy & Resources Committee, said: "It’s important to be really clear that no final decision has been made on any of the tax reform options the States may ultimately decide to implement."
He reiterated that this preparatory work is necessary to facilitate prompt implementation should the Assembly decide to proceed with the GST proposals.
Deputy St. Pier acknowledged concerns regarding consumption tax increases, mentioning that the Committee has thought carefully about incorporating safeguards into their proposals.
These include obligations to adjust related income, pensions, and benefits should any future GST rate increase be proposed.
“One of the decisions we need from the States is whether GST, if it were to be implemented, should be a lower rate and apply to most goods and services including food, or whether it should be a higher rate but exclude food sold in retail outlets.
"Our recommendation to the States is that a consistent lower rate including food is the best and most efficient approach. It is the clear preference of the business community.”
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