Tax Commissioners: Overseas retirees blighted with unintended pension tax "hardship"

Thursday 05 April 2018

A regime that sees overseas retirees taxed at the top rate of 20% on their pension that was supposed to hit “affluent” islanders is blighting others with unintended “hardship”, the Income Tax Commissioners of Appeal have said.

Their comments came following an application against the system by a Portugal-based couple, who blasted it as “discriminatory” after it lost them up to £4,000 of their pension yearly simply because they decided not to retire on the island. Had they stayed in Jersey, they would have paid just £2,000.

The issue arose when politicians passed a Budget removing all allowances for overseas pensioners in 2016, choosing to tax them all at the top rate of 20% even though they don’t use the island’s healthcare or other public services. Treasury said at the time that it would generate annual incomes for the island of around £500,000.

But that comes at a significant cost to those less privileged, according to Mr and Mrs Howard, whose names have been changed to protect their anonymity.

They were forced to retire through no choice of their own in 2013 and struggled to meet the cost of living on the island. Despite moving to Portugal to seek better value, they told Express that the income tax system “grates and grinds”, leaving them with savings of less than £10,000. 

Pictured: More than 13,000 people taking a States pension are not currently living in the island.

Their appeal was ultimately rejected because the current system is lawful, but nonetheless sparked strong comments from the commissioners, who stated that the couple’s case served to “highlight a number of issues” and showed that there was “a jurisdictional lottery in the treatment of tax credits.”

“We do not believe that, when the legislature implemented changed to non-resident allowances, they had in mind the Appellant… on a relatively small income. It is more likely that they were seeking to recover tax revenue from those in more affluent circumstances… We find that the [Budget amendment] has shown to create a level of hardship which it is highly unlikely the legislature intended,” the Commissioners concluded. 

The Howards said that they were disappointed by the news, expressing concerns that the island continues to welcome new high value residents at preferential tax rates, while seemingly targeting ex-islanders that can “no longer afford to live in their country of birth due to the spiralling cost of living.”

The couple’s appeal plight was backed by BBC DJ of 20 years Roger Bara, who downsized to a home in the Turkish Republic of Northern Cyprus on retirement due to Jersey’s high prices. He blasted the policy for overseas retirees as “immoral” and questioned why, should he and his wife get ill while visiting family on the island, he would not be entitled to free use of the hospital, despite paying the highest possible tax rate.

Pictured: Former BBC Radio Jersey breakfast presenter Roger Bara rallied against the overseas retiree tax policy.

Despite their lack of success, the Howards hope that their struggle will help to put the issue on the agenda for current and future politicians in the run-up to the May election. They will continue to highlight this – as well as other difficulties for Jersey expats – through a recently-created Facebook page.

Mr Howard commented: “There is an election looming on the horizon and we hope those hopeful candidates will be mindful of the erosion of some core Jersey values which we feel are being seriously eroded by a fiscal policy which seeks to impose hardship on the few whilst the wealthy continue to get wealthier in the land of milk and honey known as Jersey.”