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Warning of price rises as retailers hit with new tax

Warning of price rises as retailers hit with new tax

Thursday 30 November 2017

Warning of price rises as retailers hit with new tax


Food prices are likely to go up following a States' decision to bring in a new 20% tax on large retailers - despite warnings from the Minister in charge of the island's economy that it would jeopardise a new £20million investment in the sector. Senator Lyndon Farnham didn't then take part in the crucial vote.

The 'Retail Tax' is part of Budget 2018, which is in the process of being agreed by the island's politicians. It'll affect around 20 local retailers, who it's believed include car sales companies and garden centres, as well as the main supermarkets - with the exception of the Co-op.

The Co-op is seen as a 'mutual' which means they escape the tax, even though their competitors will all have to pay it. States Members have also agreed to a review of the 'mutual' tax loophole. 

During the debate today, Senator Lyndon Farnham, the island's Economic Development Minister, revealed that the new Retail Tax may put off a potential £20million investment in the retail sector, which was currently being considered by a wealthy resident. Senator Farnham was then absent for the necessary vote. 

Coop_grand_marche_st_helier.jpeg

Pictured: The Co-op will be exempt from the new tax, giving them a competitive advantage against other supermarkets.

His comments were backed-up by his Assistant Minister, Deputy Murray Norton, who said that States Officers were trying to persuade the resident to still go ahead, but that the new tax was blocking their investment:

“This weekend officers will be meeting with the people who want to do that to try and convince them that it’s still ok to do it. But they have put it on hold, and they have put it on hold for one reason only, because they are now faced with a 20% retail tax.”

"I cannot support (the Retail Tax) because of the damage it will do. This is a step too far, too quickly."

Before the vote, the Consumer Council also warned States Members that food prices would go up as a result of the tax. They claimed that it would put around 8% on the price of some goods:

"Our understanding is that this tax will impact in raising costs by 5% in addition to predicted rising foods costs, which have been noted at around 3% following the Brexit announcement. This is highly likely to add a minimum of an additional 8p cost for every £1 spent by consumers. Food is a human necessity not a luxury. Recent statistics highlight the plight of many islanders already suffering because of the high costs of all food items. There has been a steady rise in the recorded use of food banks over the last 12 months; this does not truly reflect the actual food poverty crisis as many individuals and families seek help from their own church or cultural groups. Additionally, we listen to concerns expressed by many teachers about children and young people being poorly nourished."

The Treasury Minister, Senator Alan Maclean, disagreed, saying the likely prices rises would be 1% or 2%. 

The 20% Retail Tax was also opposed by the Jersey Retail Association (which is funded by a £100,000 States grant), and the Jersey Chamber of Commerce, who both argued for a rate of 10% instead. 

But States Members disagreed, and supported the 20% Retail Tax by 26 to 14 with one abstention. 

The measure was actually agreed in principle by States Members last year (proposed by Senator Sarah Ferguson), and the Treasury estimates that it will bring in around £5.7milion a year in tax. Guernsey also has a Retail Tax of 20%, while the rate in the Isle of Man is 10%. 

During the Budget 2018 debate this week, States Members rejected the opportunity to bring in Jersey's Retail Tax at 10%. 

Large corporate retailers will now be taxed at 20% in common with utilities, and property developers - double the rate for regulated financial services companies, meaning Jersey has a 0/10/20 tax system. 

Senator Alan Maclean says the tax will raise £5.7 million from around 20 retail businesses who earn more than £500,000 in profit and do more than 60% of their business in Jersey.

  

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Posted by Harry Helier on
The Hill Street clowns seem determined to kill retail in Jersey. This silly exercise will force up prices and encourage even more off island/online buying.
Posted by Mike Russell on
But why do prices have to go up? This is not an extra overhead. Tax is a fact of life. So is double tax relief. If a UK company is paying 19%, the maximum extra is 1% of profit. Assuming a generous 20% profit margin, this would be 0.2% of existing sales prices. Talk of more increases is nothing more than profiteering.
Posted by Paul Harding on
The Retail tax is a tax on BIG profits, not sales. Any retailer accruing less than £500K profit will not incur this tax. No reason for prices to increase at all. Scaremongering at its worst.
Posted by nigel pearce on
A minimum £5 charge on every parcel under the de minimus level would help local retailers. Already it is difficult to obtain many small items locally due to the tax free import allowance. Local retailers have to pay high rents and rates compared to the competition from outside the island.
Posted by John Henwood on
The fact is this tax would be unnecessary if the States had kept to their part of the contract made with Islanders. They promised they would grow the economy (they have not) and cut States spending (it’s still going up). This tax will impact on economic growth and lead to the need to further new taxes. We are in a vicious downward spiral and the Council of Ministers is in denial. They are destroying the enterprise culture that made Jersey great. Frankly, they cannot be trusted to do the right thing. As someone said, “It’s the economy, stupid”.
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