Wednesday 11 December 2024
Select a region
News

Co-op set to escape proposed Retail Tax

Co-op set to escape proposed Retail Tax

Wednesday 08 November 2017

Co-op set to escape proposed Retail Tax

Wednesday 08 November 2017


The Treasury has given its biggest hint yet that the Co-op could be exempt from a proposed new 20% tax on retail businesses - but concerns are already bubbling over whether this is fair in a highly competitive sector.

Treasury Minister Senator Alan Maclean revealed earlier this month that businesses that do more than 60% of their business in Jersey, and turnover more than £2million per year, could be hit by a new 20% retail tax if his 2018 Budget is approved.

The move could generate more than £5million each year for the States, which would help to plug the funding gap left behind by the rejected health charge and the side-lined liquid and solid waste charges.

Since its announcement, however, there has been confusion and disquiet among Co-op shareholders over whether they’ll come under the new tax.

Yesterday, Senator Maclean, and the Comptroller of Taxes, Richard Summersgill were grilled over the plans, which have already been met with strong concerns from leading local business figures including the owner of Voisins and UK fashion guru Tessa Hartmann, in a Corporate Services Scrutiny Panel hearing.

tessa hartmann gerald voisin

Pictured: Fashion guru Tessa Hartmann and Voisins owner Gerald Voisin have previously hit out at the plans.

Mr Summersgill said he was unable to confirm or deny whether the Co-op would fall under the new tax. Nonetheless, he described how entities that operate in the same way as the Co-op would be exempt.

He said that mutual/co-operative societies, “occupy a slightly different space in Jersey legislation” because they engage in what’s known as ‘mutual trading’. In the Co-op’s case, some of the customers also own the business as shareholders, meaning that the company effectively trades with itself. According to old case law, Mr Summersgill confirmed entities operating in this way cannot be taxed. Nonetheless, not all of their shoppers are shareholders. Mr Summersgill added that the element of their profit made from such customers - tourists, for example - could be liable for tax.

The news will be a bitter pill for other shops in a highly competitive market, who are likely to have to pay the full tax. The Co-op’s exemption would give them a clear advantage, while other supermarkets may be forced to pass the tax bill to customers in the form of higher prices. 

Coop_grand_marche_st_helier.jpeg

Pictured: The Co-op's Grand Marché branch.

Questioned over whether this was “a level playing field” by Panel Chairman Deputy John Le Fondré, the Treasury Minister maintained that the situation for the Co-op was the same before the advent of zero-ten. He also hinted that a potential Co-op exemption from the retail tax may mitigate against other major supermarkets pushing up food prices as they attempt to remain competitive. 

While the Hearing appears to have outed one major retailer, the remaining group who will be affected are yet to be named. The Treasury Minister revealed, however, that three quarters of businesses likely to be hit were not locally owned. For the minority that are, he confirmed that Jersey shareholders would receive a tax credit to offset the impact. “So they won’t be paying tax twice,” he said.

When probed by Senator Sarah Ferguson, the Minister declined to go into detail over the exact areas of retail likely to be hit, simply stating that the tax would encompass “a raft of sectors.” However, the Budget 2018 document suggests that it goes beyond just food and high street retail as originally believed. It also identifies motoring, jewellery and gardening as possible target areas.

collage-2017-11-08.jpg

Pictured: Garden centres and car dealerships could be in the scope of the Retail Tax plans.

Through questioning, Deputy Simon Brée also ascertained that companies selling fuel such as domestic heating oil could also be within the scope of the tax. Paul Eastwood, Deputy Comptroller of Taxes, clarified that the tax could affect any business "so long as it is a seller of goods."

Sign up to newsletter

 

Comments

Comments on this story express the views of the commentator only, not Bailiwick Publishing. We are unable to guarantee the accuracy of any of those comments.

You have landed on the Bailiwick Express website, however it appears you are based in . Would you like to stay on the site, or visit the site?