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A group representing retailers has insisted that introducing a goods and services tax will harm smaller businesses - challenging P&R's assertion that it won't.
The Guernsey Retail Group (GRG) says Policy and Resources is wrong to say that - after it was recently claimed that companies with a turnover of less than £300,000 per annum would not have to register for GST and so the tax threshold would protect those businesses
Pictured: P&R has said small businesses won't have to register for GST. Read the above story HERE.
As part of its plans to make the island’s finances more sustainable that will be debated next month, P&R wants to introduce a 5% GST, with a lower income tax band of 15% on earnings up to £30,000, while also borrowing £350m. for major projects.
P&R said non-finance businesses will need to have a turnover of more than £300,000 a year to register for GST under its current modelling, although this is still in the planning stages.
It will mean they will not need to submit quarterly returns or charge the tax to their customers, but they also can not claim back the tax that they pay on their supplies.
In the UK the threshold for VAT registration (a GST equivalent) is a business turnover of £85,000; in Jersey it is £300,000.
The detail is contained in a series of Frequent Asked Questions published by the committee at ourfuture.gg/public- finances.
Pictured: More information on the tax proposals are available at ourfuture.gg/public- finances.
P&R Vice-President Deputy Mark Helyar is the finance lead.
“I appreciate that it is unrealistic to expect many members of the community to be able to find the time to read a 150-plus page policy letter, so the website content and Frequently Asked Questions are designed to try and give people the core information they need,” he said.
“As an example, one of the claims we hear regularly is that GST will damage small businesses. It’s not true, but it’s a common misunderstanding. In most similar systems, very small businesses are not required to register for Goods and Services Tax."
The GRG said that based on the feedback received from many retailers, the effect of a consumption tax on local traders in addition to an increase in administration costs will "likely have a significantly negative effect on the sector and therefore the health of local retail centres".
Pictured: The Policy and Resources Committee.
Korinne Le Page (pictured inset top), Head of Retail Development, warned that "quite simply, GST would be disastrous for the retail sector".
She said the tax "would increase IT and admin costs, add to prices at the tills, does nothing to level the playing field with UK and foreign retailers and the imposition of a 6% tax would naturally reduce the disposable income of consumers and their ability to spend in local shops".
Ms Le Page called on P&R to stop "persisting with the proposal to introduce a new tax" and instead "focus on what it needs to do to enhance and boost local businesses to ensure that Guernsey residents have a breadth and variety of retail options appropriate and proportionate for the needs of the Island".
She said that the GRG has particular reservations with the States’ plan to tax UK and foreign retailers supplying more than £300,000 of goods into the Island. The group also believes it would be difficult to monitor and almost impossible to manage, so local shops would be at a 6% disadvantage.
Miss Le Page added: "Local retailers who are in competition with UK and foreign online sellers have been calling for many years for the States to ensure a level playing field. The GRG believes that the unintended consequences of decreasing turnover and increasing costs would be detrimental to many sectors, which will inevitably have a serious negative effect on the Island.
"This proposal also does not recognise the value of our industry, which employs 4,000 people locally and we remain concerned by the lack of general support from government for local retail, along with hospitality and other non-finance service sectors.
"We would also question what the States is doing to address the root issue of an ageing demographic and make the retail and hospitality industries more robust."
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