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The Guernsey Retail Group has warned that any goods and services tax (GST) would have a “hugely detrimental effect” on local businesses and that an increase in online shopping should be expected if the island brings it in.
Korinne Le Page, Head of Retail Development at the Group, said whilst it is recongised that the island needs to find new ways of increasing income for public services, “GST is simply not the silver bullet as it is made out to be and we need to look at ways of growing and diversifying our economy.
“Any sort of tax on purchases increases prices so local consumers will simply switch to the internet. It is unlikely to affect discretionary spend as we believe consumption will stay the same, but there is a risk that this income will move off-Island so there is a significant risk to retailers.”
Many retailers are reportedly worried about remaining competitive as well as the cost of administrating the tax should it be introduced.
The Policy & Resources Committee is on course to publish its revised tax proposals by the end of this month, ahead of the States tax review debate in January.
It is expected that senior politicians will again attempt to convince States’ members to adopt GST at a rate of 5% or 8%, possibly alongside some other changes to income and corporation taxes. This could include a reduction in the rate of income tax by a penny in the pound or other measures.
Pictured: A Good and Services Taxes has been on the cards for much of this political term.
Ms Le Page added: “Any rise in local prices through GST means retailers will find it harder to remain price competitive and lead to lower levels of investment in the sector.
“We believe this would also act as a barrier to entry for new stores, either local or UK outlets, particularly at a time when retail is bouncing back. Tourists returned this summer and shops have reported a fruitful season, so the lack of GST is a selling point that other jurisdictions don’t have.
“The probable outcome of such a tax on consumption would be a decline in retailing in Guernsey and a reduction in choice on-Island, at a time when we should be looking to provide diversified employment opportunities and retail can play an important role in achieving this.
Ms Le Page urged all involved to carefully consider the “unintended consequences of GST” given the “substantial impact” it could have on the community.
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