Policy and Resources Committee publishes detailed tax reform responses, says GST revenue estimates are cautious
- Policy & Resources Committee has published detailed responses to questions about the 2026 Tax Reform Package from Deputy Curgenven
- GST revenue estimates include cautious assumptions and do not account for increased spending from households with higher disposable income
- Approximately 1,700 businesses expected to register for GST, representing more than 97% of aggregate business turnover
- Proposed International Services Entity scheme expected to generate around £11m annually while minimising administrative burdens
- Committee encourages islanders to review published responses and use online calculator to assess personal impact of tax reforms
The Policy & Resources Committee has published detailed responses to a series of questions from Deputy Curgenven regarding the 2026 Tax Reform Package.
The responses provide additional information on a wide range of topics, including the assumptions underpinning projected GST revenues, the operation of the proposed International Services Entity (ISE) scheme, the impact on businesses and public finances, and future transport tax proposals.
Overview of P&R's answers
The Policy & Resources Committee has released a breakdown of the proposed 2026 Tax Reform package, detailing how a £55 million net revenue target will be achieved through a combination of new consumption taxes and industry fees. Central to the plan is the introduction of a 3% Goods and Services Tax (GST), projected to generate £41 million from local households and £5 million from visitors,.
The Mechanics of GST Revenue
The committee's estimates are based on a taxable consumption base of £1,358 million for local households. These figures were derived from 2017 and 2022 household income and expenditure data, adjusted to 2026 terms. The revenue projections are characterized as "cautious," as they do not factor in GST from high-value "luxury" purchases, such as substantive construction works or expensive vehicles, nor the additional GST that might be generated by increased take-home pay resulting from other tax cuts,.
While the gross revenue from GST and industry fees is higher, the £55 million figure includes several "netted off" components:
- International Services Entity (ISE) fees: +£11 million.
- Income support adjustments: A net zero impact, with a £1 million reduction due to higher net incomes offset by a £1 million increase for new claims.
- Essential Cost Relief scheme: -£1 million.
- Retail and hospitality tax freezes: -£1 million.
Business Impact and the ISE Scheme
Approximately 1,700 businesses are expected to exceed the registration threshold for GST, representing over 97% of the island's aggregate turnover. While several thousand smaller "micro-entities" will likely fall below the threshold, the committee suggests the competitive impact will be mitigated because these unregistered firms will still bear GST on their own input costs without the ability to reclaim it,.
The International Services Entity (ISE) scheme is a vital pillar for the finance sector, designed to raise £10 million to £12 million annually through fixed fees,. This scheme allows international firms to pay a fee in exchange for an "End User Relief Certificate," exempting them from GST on their inputs and reducing administrative friction. Fees range from £300 for trust vehicles to £78,300 for banking businesses. Notably, Guernsey’s version will include the e-gaming and international insurance sectors, which are not part of Jersey’s equivalent scheme.
Inflation and the Public Sector
The 3% GST is expected to trigger a 1.9 percentage point increase in inflation (RPIX),. While public sector pay awards are often benchmarked against RPIX, the committee emphasized that pay is subject to annual negotiation and does not automatically track inflation,. They also noted that many public employees will see their direct tax liabilities fall, potentially resulting in a real-terms increase in take-home pay despite the new GST,.
From a pension perspective, the 1.9% inflation spike is estimated to increase Public Sector Pension Scheme outgoings by £1.7 million per year. However, the committee highlighted that the scheme is currently more than 99% funded and has successfully managed much higher inflation peaks in the past, such as the 8.5% reached during the recent energy crisis,,.
Future Outlook
The committee clarified that the 3% GST rate is "protected" until a scheduled review in 2030. Any potential increase to 5% would be a matter for a future Assembly and could not be implemented before 2031. Furthermore, transport taxes are set to rise, with indicative rates expected to raise £4 million in 2027/8 and an additional £3 million by 2032.
Regarding imports, 90% of goods are expected to be handled by registered overseas suppliers. For others, a new online customs system called "GEMS" will allow residents to declare and pay GST on personal imports above a certain threshold before they are released at the border.
The committee explained that the proposed GST revenue estimates incorporate cautious assumptions to accommodate aspects such as behavioural changes, which are difficult to predict. While many households will have more disposable income because they will be paying significantly less income tax and social security, no allowance has been made for increased GST on any additional spending they might use that extra income for. The revenue could therefore be slightly higher than forecast.
Regarding business impacts, the committee's responses explain that approximately 1,700 businesses are expected to be required to register for GST, accounting for more than 97% of aggregate business turnover. The evidence considered by the committee, including discussions with administrators in Jersey, does not indicate widespread behavioural changes by businesses seeking to remain below the registration threshold.
The committee has reiterated that the proposed International Services Entity scheme is expected to generate around £11m per year while minimising unnecessary administrative burdens for businesses exporting services internationally.
Deputy Yvonne Burford, Vice-President of the Policy & Resources Committee, said: 'We welcome rigorous scrutiny of proposals of this significance, and we have been happy to provide detailed answers to every question submitted. However, what these responses demonstrate is that a number of assumptions and assertions which have been circulated on social media simply do not stand up when tested against the available evidence and analysis.'
She added: 'We want there to be robust debate about our proposals and for people to reach their own conclusions on the merits of them. However, we naturally want the debate to be based on facts. We would encourage people to read the published responses for themselves and consider the evidence in full. We would also encourage islanders to use the online calculator at www.gov.gg/taxreform to see how the proposals, when taken together, are likely to affect them.'
The full responses to the Rule 14 questions can be read at https://parliament.gg/parliamentary-business/questions.
Q&A
Q: How many businesses will need to register for GST?
A: Approximately 1,700 businesses are expected to be required to register for GST, accounting for more than 97% of aggregate business turnover.
Q: How much revenue is the International Services Entity scheme expected to generate?
A: The proposed International Services Entity scheme is expected to generate around £11m per year while minimising unnecessary administrative burdens for businesses exporting services internationally.
Q: Where can islanders find information about how the tax reforms will affect them personally?
A: Islanders can use the online calculator at www.gov.gg/taxreform to see how the proposals, when taken together, are likely to affect them. The full responses to Rule 14 questions are available at https://parliament.gg/parliamentary-business/questions.
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