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Plans to scrap prior year tax system announced

Plans to scrap prior year tax system announced

Thursday 30 July 2020

Plans to scrap prior year tax system announced


Around two thirds of islanders could have their 2019 tax bill frozen until 2023 under new plans to get more people paying their taxes based on their current earnings, rather than last year's.

Roughly 45,000 islanders are currently paying their tax in arrears - a system known as Prior Year Basis (PYB) - and will be moved to a Current Year Basis (CYB).

Treasury Minister Deputy Susie Pinel is now proposing reforms that she says will simplify the way two-thirds of Jersey’s taxpayers pay their taxes, as part of the government’s £150m stimulus package announced earlier this month.

While the move to Current Year Basis has been in the works for the past decade, the government said the plans have been accelerated due to the pandemic to help islanders whose earnings may have reduced significantly this year.

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Pictured: The Prior Year system can make it difficult for people to pay their taxes if their income reduces.

Under the Prior Year Basis system, if a taxpayer’s circumstances change and their income reduces, it can become difficult for them to pay a prior-year’s bill on a current year’s income.

Under the new measures being proposed, these taxpayers would be moved onto the Current Year Basis and pay their tax as they earn. 

All tax payments made during 2020 would be moved at the end of the year to pay off the 2020 tax bill. 

Those who are self-employed or pay tax on account through two payments in May and November are being given the option to not pay tax in November. The same option will also be offered to pensioners.

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Pictured: Richard Summersgill, Jersey's Comptroller for Taxes.

However, Comptroller for Taxes, Richard Summersgill said it would be more prudent to people to still make a payment if they can, as it would "reduce their future tax balances".

Likewise, he recommended that islanders whose earnings have not been affected to continue making their payments as normal.

For all 45,000 taxpayers concerned, the 2019 tax bill would be frozen until January 2023 and a range of repayment options are being developed. 

The move has not been set in stone, however, and will be subject to approval by States Members.

The Treasury Minister said she would be writing to all PYB and CYB taxpayers over the next week to provide them with information about the proposed changes.  

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Pictured: Taxpayers will soon receive a letter from the Treasury Minister.

She said she hoped it would provide an "extra financial relief" to islanders while helping put millions back into the economy.

"This could put £18million to £20million in the hands of taxpayers to help them manage the aftermath of the lockdown," Mr Summersgill said.

Islanders will also have the opportunity to share their views on the tax reform proposal and the payment options in a survey which will launch on 3 August online, with paper copies available Parish Halls, the Library in St. Helier and the Citizens Advice Bureau.

“The problems associated with paying taxes on a Prior Year Basis have long been spoken about and I understand that many households have gone through a worrying time as their incomes have been impacted by the covid-19 pandemic,” Deputy Pinel said. 

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Pictured: The proposed changes will have to be approved by the Assembly.

“That is why I have asked officials to accelerate the work surrounding abolishing PYB from this year onwards. This measure will bring relief to many islanders who may have had reduced incomes for much of 2020 due to covid-19 and are worried about the tax they owe. 

“It will, in most cases, put more money in many islanders’ pockets in the short-term, which will help to stimulate Jersey’s economy as the island recovers from the pandemic. We also want to make sure that the payment options for the 2019 tax liability are affordable for everyone.”

Deputy Pinel explained her department had opted to defer the tax payments rather than simply write off the liability.

"This represents £320million, especially given all the additional costs for the government during the pandemic, payments will have to be made but they will be delayed.

"It would have been unacceptable to write it off not only from a financial and economical point of view but also from a fairness point of view."

The proposed changes are scheduled for debated by politicians in October.

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Comments

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Posted by Jon Jon on
Trouble in this world now no one saves money ,if your responsible you set aside money for your taxes and bills etc,plus itis works pretty good ,taking your tax off your wages every month,so why change.
Posted by Keith Marsh on
Its always a worry when there is a photo of the smiling assassin ~ as if everyone does not have enough to worry about at this time, playing games with Income Tax is the last straw. Having waited months to get a reply from my last query; I still await a reply to an email sent 4 weeks ago. Before messing things up even more, please Deputy Susie, get your house in order ~ correspondence up to date, so everyone has time to move forward carefully.
Posted by Michael Tostevin on
As a self employed person, I paid part of my tax online in May before the deadline. The money remains in my account and I have tried several times to contact the Income Tax Department to find out what is going on, but cannot get any response.
Posted by john garner on
"This could put £18 million to £20 million in the hands of taxpayers to help them manage the aftermath of the lockdown," Mr Summersgill said.....which roughly equates to £200 per person ...hardly a life changing sum ...even assuming it was all spent locally .It actually says in the article " it would be more prudent to people to still make a payment if they can, as it would "reduce their future tax balances"....Please can someone tell the Finance Minister that Jersey is not Venezuela and we still only spend a pot of money once ..Thank You
Posted by Michael Blampied on
I couldn’t agree more with Mr Marsh. When ITIS was introduced ca 2005/06 I made what has turned out to be a very wise decision to create a spreadsheet recording the ITIS payments made against my annual assessments, thereby enabling me to track at each year end whether i was in credit or debit. One might expect the tax department to provide this information to each tax payer on an annual basis as a matter of course, but it has only ever been furnished to me once, pursuant to a specific request (or to be more accurate several requests). As the years have progressed (and particularly since the introduction of their “new system”) the standard and efficiency of communication from the department has deteriorated to a level where I just don’t bother anymore. I make regular payments, maintain my spreadsheet and bank statements, ready and waiting in the event that their sub optimal system suggests that I owe them money I don’t. I would suggest that the department first concentrates on mastering walking before running. Providing people with their assessments in a timely manner - eg late June/early July would be a good start - as opposed to March 2020 in respect of 2018!
Posted by William Boyd on
Beware of politicians telling you a lot of people will benefit (another thing to be laid at the door of Covid). Many, many more will definitely NOT benefit and will become debtors. What was wrong with the current system? The cash flowed in each year. Now this dog's breakfast will throw all the cards up in the air and nobody will know how or where they will land. Unbelievable.
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