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FOCUS: Further work on company tax as more deputies reject GST

FOCUS: Further work on company tax as more deputies reject GST

Friday 18 February 2022

FOCUS: Further work on company tax as more deputies reject GST

Friday 18 February 2022


The Policy & Resources Committee is pledging to look again at how much additional tax could be raised from companies as more deputies line up to say they will oppose the Committee’s plans for a goods and services tax (GST).

Treasury lead Deputy Mark Helyar said the Committee “intends to commission additional independent analysis to further consider corporate tax options and is presently defining the terms for this work”.

But the Committee said it is “very unlikely” that additional taxes on company profits could avoid the need to increase personal taxes to fund a projected shortfall in States’ finances of up to £85million a year. 

And Deputy Helyar warned that “it is critical that we don’t lose business, and ultimately lose jobs, to other jurisdictions” and said “Guernsey already raises a similar proportion of its revenues in tax from businesses as other jurisdictions”.

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Pictured: The Policy & Resources Committee continues to favour GST to address a projected deficit in public finances but is facing a wall of opposition from other deputies, such as Charles Parkinson (above, bottom), who want other options looked at more closely. 

Last year, the Committee asked deputies to back GST in principle but withdrew the proposal when it became clear during debate that it would be heavily defeated if pushed to a vote. Instead, the States approved an alternative proposal from the Committee to investigate other options, consult more and return to the States for another debate by July this year.

Ahead of that second debate, the Committee last week launched ‘Our Island, Our Future’ – a campaign of engagement with the community to explain the need for tax rises and why it considers GST not only the most effective but also the fairest way of bringing in tens of millions of pounds of additional tax revenue each year.

A few days into the public engagement campaign he is leading, Deputy Helyar remains committed to GST in the face of considerable opposition to his Committee’s plan.

“A package of tax reforms which includes GST combined with social security reform to increase allowances and improve pensions and benefits still remains the best option on the table for raising the significant revenues needed to protect essential services while creating a more progressive tax system that would see those on low incomes pay less overall compared to now,” said Deputy Helyar.

Last week, Express spoke to several deputies from across the political spectrum in the States and reported HERE on responses which ranged mostly from opposed to sceptical.

Express has since canvassed the views of almost all deputies except those putting forward the latest proposals. Most deputies replied and only two indicated that they were giving serious consideration to supporting GST.

Opposition to GST appears strongest among many deputies who are usually more likely to support the Policy & Resources Committee on other political issues.

Deputy Marc Leadbeater

Pictured: Deputy Marc Leadbeater said he was opposed to GST.

“I’ve yet to hear an argument to convince me that GST is a good option,” said Deputy Marc Leadbeater.

“The thought of such a tax worries many, especially low to middle earners…so I don’t think the majority of the public will be persuaded to support GST.”

Deputy Victoria Oliver could not envisage circumstances in which she would vote for GST.

“As always, I will listen to debate, although feel it would have to be a very, very important point that I haven’t thought about to change my mind,” said Deputy Oliver.

She feels it is “a long shot” to imagine the Committee shifting public opinion in favour of any package which includes GST.

Deputy David De Lisle

Pictured: Deputy David De Lisle is doubtful of the need for substantial tax rises and opposes GST in any event.

Deputy David De Lisle said he is “totally opposed to the introduction of GST” and “will not be voting for GST under any circumstances”.

Deputy De Lisle said there is “no prospect of the public agreeing to GST”.

Deputy Nick Moakes, a member of Deputy Helyar’s Guernsey Party, said he is “against GST” and that he has “written and spoken about my views on the subject on more than one occasion”.

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Pictured: The Guernsey Party, which holds five seats in the States, remains opposed to the introduction of GST despite the policy being led by its leader in the Assembly, Deputy Mark Helyar.

Deputy Liam McKenna has published a video on social media in which he tries to rally public opposition against GST. 

Deputy Helyar said that he and his colleagues on the Policy & Resources Committee “are still listening and examining every other possible option to see how we can minimise the impact of raising additional revenues on the public and the wider economy”.

“This includes other workstreams being carried out by the States, such as the population review, looking at maximising the proportion of the population that is economically active, improving efficiency through public service reform and looking at all other options for cutting costs across all States Committees," he said.

Deputy Charles Parkinson has consistently called for the Committee to be bolder on reforming the island's company tax regime, which he believes could be made to generate tens of millions of pounds more per year before any decision is made to increase personal taxes.

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Pictured: Deputy Charles Parkinson spoke to Express about his ideas on taxation in a podcast which can be listened to HERE.

This week, the Committee said: “Its current assumption is that an additional £10million [per year] will come from corporate taxes.

"This continues to be reviewed and updated based on the latest available information and it is also subject to the ongoing discussions taking place internationally on corporate tax rates. Guernsey, alongside the other Crown Dependencies, is engaging actively in those discussions.

"This means the amount of revenues raised could ultimately be more or less. However, it is very unlikely it could generate the full £85million per year.”

Deputy Helyar doubts the viability of some ideas put forward to raise more revenue through company taxation.

“We know there are some claims out there that sound attractive at face value but lack substance," said Deputy Helyar.

"Having some detailed independent work to separate out which options are plausible, and which are not, can only help this crucial discussion about how we safeguard the future of essential services.”

The Committee is also challenging States’ members and committees to come up with alternatives if they oppose the Committee’s proposal to raise tens of millions of pounds a year more through GST.

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Pictured: The Policy & Resources Committee has asked deputies who oppose its proposals for GST and other tax reforms also to come up with ideas of their own. 

It is clear from Express’ enquires that many deputies believe the projected deficit in States’ finances could be addressed mainly by spending cuts and economic growth.

Deputy Leadbeater said: “Organisational changes are already underway which are expected to deliver recurring savings, which in turn should reduce the overall deficit projections.

“However, I accept that government needs to address a projected deficit of whatever figure that may be. To do this by only raising or introducing taxes, though, would be short-sighted in my opinion. Government also needs to work more smartly and efficiently, reducing costs by doing things differently.

“I would like us to review our spending in the first instance. Areas such as legal aid, for example, need examining because we burn millions on this service annually. Look after the pennies and the pounds will look after themselves.

“I’ve yet to see the diversification of our economy that we all spoke about during the election campaign. I’d like to see joined up working with government and the private sector to bring some of these ideas to fruition. There are entrepreneurs out there with great ideas that need our support to enable them to establish their businesses.”

Deputy Leadbeater identified medicinal cannabis, niche tourism, medical tourism and the marine economy as examples of economic sectors which could potentially generate substantial tax receipts to lessen any requirement to raise personal taxes.

Deputy Oliver said: “Personally, if I can’t afford something I save until I can. I think that government needs to decide more what it needs rather than wants. If we have to have more taxes, try a tax that actually helps to improve the island.”

Deputy Victoria Oliver

Pictured: Deputy Victoria Oliver doubts that the Policy & Resources Committee will be able to get substantial increases in personal taxes through the States unless it can demonstrate further efforts to reduce public expenditure. 

Deputy De Lisle said: “There is no need to raise taxes substantially to address the projected deficit.

“The States must reduce spending accordingly in order to eliminate the deficit. Better to boost growth and cut spending than raise taxes that could derail recovery.”

However, there was more support for the Policy & Resources Committee’s latest proposals from Deputy Andy Cameron.

“I wish I could say that I prefer an alternative [to GST]. I just can’t see many alternative options for raising £87million. I’d be very encouraged to listen to the public or business community proposing any fairer alternative,” said Deputy Cameron.

“I will listen to the debate obviously. No deputy wishes to introduce new taxes, but our ageing demographic and our health and education requirements make tax increases a necessity.

“Will it jeopardise my chances of being voted in for an additional term? Undoubtedly it will. In my opinion, any deputy putting their own interests before caring for all islanders doesn’t deserve another term.

“Many deputies have already voted for numerous costly proposals. To now walk away from the difficult decision on how to fund these and in some cases state ‘no to new taxes’ is irresponsible.”

Deputy Andy Cameron

Pictured: Deputy Andy Cameron is challenging other States' members who have voted to increase public spending to explain how their plans will be funded if they also oppose GST and other tax increases.

Deputy Cameron is more hopeful than most of his colleagues that public opinion could become more favourable towards GST during the Policy & Resources Committee’s period of public engagement.

“I’m hopeful that the majority can be convinced. But many of us are already stretched financially - so I totally understand the opposition,” he said.

“Covid and Brexit have pushed the cost of living to extremes. Unfortunately, we still need to fund essential services. We can’t kick the can down the road for the next term of deputies.

“With the correct mitigations in place so that lower earners are better off with GST and exceptions on healthy foods, sanitary products, school uniforms, sports equipment, etc., it could be fairer than now.

“I would need reassurance that lower earners would definitely be better off before I’d vote for it.”

READ MORE...

"P&R should resign if defeated on GST"

P&R wants to win public support for GST ahead of summer debate

Why the States' leaders believe GST is needed now

Opposition across the States to P&R's latest GST plan

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