Making the case for a 10-10-10 tax model

Thursday 16 January 2020

The idea of reforming Guernsey's current tax system by lowering income tax to 10% and introducing 10% consumption and corporation tax has been raised in the States.

Deputy Jan Kuttelwascher wants the model, which was considered as part of a tax, pensions and benefits review last term, to be looked at again in more detail.

"I was part of that review panel and one of the options that was modelled was to have a system where we had 10% consumption tax, a 10% income tax and a 10% company tax," he said. "What was interesting about that was that it showed there would be a net increase in revenue and, because of the reduction in income tax, when it was discussed with other parties it seemed to be something that could have been popular, but it wasn’t pursued."

Speaking to Express, Deputy Kuttelwascher believes that GST or some other form of consumption tax is "on the way" and that lowering income tax will soften the blow to the public.  

"For example, if you go to Monaco, they have got no income tax but they have roughly a 20% sales tax which no one complains about.

Deputy Jan Kuttelwascher talks about a 10:10:10 fiscal strategy. 10% GST, 10% income tax and 10% corporate tax.

— Christopher Green (@deputycgreen) January 16, 2020

"In Bermuda they have 100% import duty on everything because they have no income tax. Things are very expensive because people pay no income tax, but at least people have some control over what they pay out.

"Reducing income tax to 10% [as part of a 10-10-10 model] is worth a look. It's an option that I think should be considered."

Policy & Resources Vice-President Lyndon Trott responded to Deputy Kuttelwascher's idea.

"It was a good speech and it was given from a position of experience. He talked about a 10% consumption tax aligned with a 10% personal income tax rate aligned with a 10% corporate tax rate.

"But how on earth one persuades the international community that our dominant rate isn’t 10% in that environment is a challenge I would welcome him undertaking.

Pictured: Deputy Lyndon Trott does not think Guernsey could achieve tax neutrality under Deputy Kuttelwascher's proposal. 

"The reason we have remained strong and prosperous is because we adopted a fiscal policy that enabled us to convince, then and now, because it’s true, that our underlying rate of basic rate of corporate income tax is 0% and that means that we can continue to maintain that tax neutrality."

"Now whether we could do that under Deputy Kuttelwascher’s scenario, I can’t be certain but I think’s unlikely.

"I'm not completely discounting it as an option but I think it is extremely unlikely to be a solution."

Pictured top: Deputy Jan Kuttelwascher.