Ozouf: Cut the retail tax - but add it to booze and gambling

Thursday 16 November 2017

One of the island’s senior politicians is proposing to slash the planned retail tax and make up the shortfall with a raft of measures ranging from higher duties on the liquor trade to dramatically cutting the inbound duty-free cigarette allowance.

Senator Philip Ozouf also wants the alcohol industry to be investigated by the regulator amid allegations by him of excessive margins.

Under the Treasury Minister’s Budget 2018 proposals, large retailers are to come under a new tax of 20%.

But Senator Ozouf has issued a robust defence of Jersey’s “vibrant and busy” high street, arguing that “levying this indiscriminate tax is likely to act as a disincentive for retailing” and could also lead to higher prices for consumers.

Instead, he’d like to see that percentage slashed from 20% to 10%. The move would see potential States income fall by nearly £3million, but he’s come up with a raft of measures to plug that gap.

Senator Ozouf is proposing to bring the inbound duty-free allowance for cigarettes to 40, which he says could bring in an additional estimated income of £1.5million.

Pictured: Senator Ozouf is suggesting that the inbound duty-free allowance for cigarettes is cut from 200 to 40.

Estimating that 25 to 30% of cigarettes consumed in Jersey are duty-free products, he argues that there is a “real justification” for the move, which would also have health benefits.

“The 200 cigarette limit was established many decades ago. It was certainly before the negative effects of smoking became more widely-known and accepted. The current duty-free allowance therefore remains completely at odds with the health objectives set out in the Tobacco Strategy,” he explained in a report.

However, investment would be needed to make the plans workable - £200,000 of contingency funding to help Customs and Immigration officials to ensure compliance at the island’s ports. Also, since Duty Free cigarettes are currently only sold in units of 200's at the outlets which service Jersey-bound passengers, the effect of reducing the limit to 40 may be to prevent their purchase altogether. 

The former Minister is also angling for big changes in the liquor and gambling trade trade. Under his plans, the new large-scale retail tax would also be applied to bookmakers, pubs and clubs – but at his suggested rate of 10%.

If approved, the extension would generate £250,000 from the gambling trade and £450,000 from the liquor trade.

Pictured: Gambling outlets like William Hill would also become subject to a 10% tax under Senator Ozouf's plans.

The moves, Senator Ozouf says, come amid allegations over the margins on alcohol sales in the on-licence sector. 

“The most startling differential is that from the on-licensed trade. The example of a pint of beer shows that net of duty and tax, a pint of beer is 97p higher in Jersey than in the United Kingdom. Does it really cost an additional 97p to serve a pint of beer in Jersey?”

According to his figures, the average pint (net of Duty and GST) stands around £3.03 in Jersey, while UK prices stand around £2.06.

He would like to see this - alongside the liquor trade as a whole - investigated by CICRA in a review expected to cost around £50,000. 

Reviewers would be asked to take into account whether consumers are getting value for money on popular alcoholic drinks, current establishments' running costs, as well as providing specific advice to the Assistant Minister with responsibility for Tourism on how best to regulate alcohol licensing and how best to secure a "vibrant and safe night-time economy."

Pictured: Senator Ozouf would like to see the alcohol industry pay 10% tax, and undergo a review by CICRA.

Wealthy incoming residents are also in the firing line. If States Members agree, his plans would see a new Stamp Duty Band rate of 10% for properties of over £10million.

The proposed Retail Tax has so far caused outcry from leading local businesses, including the owner of Voisins and UK fashion guru Tessa Hartmann.

One of the biggest concerns, however, has been over the tax status of ‘mutual traders’ like the Co-op. In a Scrutiny Hearing last week, the Treasury department revealed that it could be set to escape due to a legislative loophole.

Because some of the customers also own the business as shareholders, the company effectively trades with itself, and entities operating in this way cannot be taxed according to old case law.

Senator Ozouf is also seeking to remove this get-out clause, and provide for a “level playing field," but not until 2019.