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Of four business groups representing the finance sector and other industries, only one is backing Policy and Resources plans for reforming tax and social security systems.
The debate on the island's Tax Review is underway, having started yesterday with an impassioned plea from Deputy Peter Ferbrache who told the States that they have to do something about Guernsey's growing financial deficit.
Ahead of the debate only GIBA had been convinced to back P&R out of the bodies representing local businesses and businesspeople.
The Guernsey International Business Association said that it had been "providing input into the States of Guernsey’s development of the Tax Review – Phase Two proposals" and as such its members believe that "the proposed tax package published in a policy letter on 28 November represents a sound first step in a longer-term solution to address a structural deficit created partly through the problem of an ageing population and rising costs".
Pictured: Protesters at St James Street ahead of the Tax Review debate yesterday.
GIBA also criticised amendments against P&R's plans which seek to bring in higher corporate taxes - saying it would be detrimental to the island's most economically valuable sector.
"We recognise that these are challenging issues for Deputies to consider," acknowledged GIBA. "However, the policy letter does contain a combination of elements that offer a sound basis on which to move forward. The proposals also attempt to rebalance the island’s sources of tax revenue in line with other jurisdictions, such as Jersey. We welcome the opportunity to engage directly with Deputies who wish to understand more about the potential impact of the different tax options being proposed in the policy letter and in the various amendments over the coming week."
By contrasts, the Confederation of Guernsey Industry does not agree with P&R's plans to introduce a goods and services tax at 5%.
It says "GST would be hugely damaging to Guernsey business" and that its members have "raised concerns that the proposed GST will have a detrimental effect on local businesses, be costly to administer and fails to address the reality of living on an island with finite resource. The CGi has re-emphasised its preference for a modest rise in income tax along with other measures."
The CGi said that its members were also concerned about the "apparent failure of successive States to address expenditure", explaining that "civil service reform and curbing public spending has been a topic raised over the previous two terms and it seems little action, if at all, has been forthcoming. When households and businesses are having to ‘cut their cloth’ accordingly, given the present financial climate, the CGi questions whether the States and civil service should be doing the same?"
Both the Institute of Directors and the Chamber of Commerce have questioned the published size of the island's financial deficit - estimated to be around £85million per year.
Pictured: Guernsey's Chamber of Commerce.
The IoD said 79% of its members who responded to a survey on the topic were "not confident that the deficit figure quoted is an accurate and sound estimate upon which the tax changes should be based."
It also said that members would prefer to see an "increase in corporate registry fees as the preferred corporate tax option" with more than 80% of its respondents saying that "believe the tax burden should be shouldered more equally between corporates, individuals and the public service".
The Chamber of Commerce not only questioned the size of the deficit but also said surveyed members were concerned about the impact on their businesses if GST is introduced locally.
It said 21.6% favoured a straight rise in income tax, marginally ahead of 20.7% of respondents who wanted to see large cuts to government core services.
Other groups have also criticised the P&R plans including the Guernsey Retail Group which warned shops will close if GST is brought in, and the Guernsey Tourism Partnership which said "any sales tax will negatively impact on retail and tourism in the islands."
It warned that the goods and services tax "would be inflationary and put an excessive burden on companies" and it would "further reduce the Bailiwick's ability to remain competitive against its nearest neighbours".
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