States vote to switch tax to current-year payments

Wednesday 04 November 2020

Thousands of islanders paying their personal income tax in arrears will be moved onto Current Year Basis, after politicians approved the major tax system overhaul.

The move was voted in 41-2 following a debate that saw the proposal criticised for being “hasty” and lacking in detail.

The new laws will mean that anyone currently paying on Prior Year Basis (PYB) will have their 2019 bill frozen and moved to be paid over a timeframe yet to be decided. They will then have any payments made this year cover their 2020 bill, before being put on a Current Year Basis (CYB) for 2021.

Non-ITIS taxpayers like self-employed people, who are required to give their balancing pay this month, will also have their payment deferred.

Exact tax bills for 2020 will be calculated once PYB taxpayers have completed and submitted their 2020 tax return.

Pictured: Treasury Scrutiny Panel member Constable Karen Shenton-Stone called the proposal "last minute." 

The Treasury Minister put forward a report last week suggesting two options for PYB taxpayers – that they could pay off their 2019 bill over a 20-year period or for arrangements to be made for the bill to paid off when islanders reach pension age. 

However, these regulations were not part of today’s proposal, and are to be voted and debated on at a later date.

This lack of concrete regulations was a prominent concern throughout the debate. St. Martin Constable Karen Shenton-Stone said that she was “somewhat concerned that this Assembly is again debating incomplete legislation."

"The principle that the amendment could be considered without regulations is difficult to understand given the significant impact for two thirds of taxpayers," she said.

“Instead of the detailed regulations, we are expected to change the basis of taxation for 66% of taxpayers based on a hastily produced last minute proposal that is a dramatic U-turn from the Minister in relation to the payment proposal initially mooted… For anything to do with tax, the devil is in the detail. We do not have this detail. We need this detail.” 

Pictured: A key question was if ring fencing funds from the 2019 taxes as suggested would actually pay for the covid debt. 

Similarly, while voting for the proposition, Chief Scrutineer Senator Kristina Moore called the Treasury Minister’s report “not ideal”, citing a lack of modelling for Scrutiny to assess, and questioning whether the revenue raised would be enough to pay the covid debt as suggested. 

“At this time I’m still quite hard pushed to support this measure,” Senator Moore said, “because of the rapid nature of it and the inconclusive facts that we have with which to take this decision which will have an impact. It will benefit some positively, but it will have a negative impact on some growing families.” 

Assistant Treasury Minister Deputy Lindsay Ash argued firmly for the shift, saying that “we’re giving people 20 years effectively to pay it back, I don’t think that’s particularly unreasonable.” 

He added that “this simplifies the entire tax system, it has everyone working on the same basis, and that surely is a fantastic thing”, pointing out the difficulties PYB taxpayers face in situations like moving to the UK, and subsequently having to pay both their previous year’s tax and current UK tax. 

Pictured: Assistant Treasury Minister Deputy Lindsay Ash said the change would simplify Jersey's tax system.

Senator Lyndon Farnham also spoke favourably of the changes, suggesting that more money being immediately available in taxpayers’ pockets could offer a chance to bolster the economy and local business.

“This proposition does leave considerable disposable income in the economy,” Senator Farnham said, “and it leaves it in the economy now, and it leaves it in the economy over the next two to three years - the crucial time when we will be having to deal with the oncoming recession and the recovery through that... The economy needs the support now.” 

Summing up, the Treasury Minister said in response to criticism: “The principle of moving from Prior Year Basis to Current Year Basis is [what the debate] is about, the separation being that we then have time to listen to the public, to the Assembly, to Scrutiny as to how we should move forward with the regulations… 

“We’ve done as much as we can to give people a huge amount of information ahead of this debate so that it’s an informed debate. But the debate on the regulations will come later when we bring draft regulations to the States.” 

She added full regulations would be brought forward in January/February next year for debate. Revenue Jersey will publish these draft regulations in December.

Following the vote, the Government has stated that Prior Year Taxpayers do not need to take any action, and that those PYB taxpayers that pay 'on account' do not need to make their usual November payment.

The Minister also confirmed in the statement that all PYB taxpayers will be written to in the coming days.