A 5% cap on GST and legally protected tax cuts for lower and middle-income households are at the heart of an alternative tax package, put forward by Guernsey’s only political party.
The proposals from Forward Guernsey come after Policy and Resources (P&R) called on deputies to put forward “credible alternatives” to its preferred 3% GST package ahead of next week’s tax reform debate.
Forward Guernsey’s amendment would introduce GST at 4% after two years, rising to 5% after four years.
The increases would be conditional on progressive reforms including increased social security allowances, changes to income tax thresholds, and changes to pensions and benefits.
A two-thirds majority of States members would also be required to separate GST from those reforms, protecting them against being eroded by inflation.
GST cap
Forward Guernsey wants 5% written into the States’ Fiscal Policy Framework as the maximum GST rate.
Before any increase, P&R would have to publish an independent assurance review from the Fiscal Policy Panel on whether the change was consistent with the fiscal framework and appropriate given the island’s economic circumstances.
Party leader Deputy Gavin St Pier said: “Tax reform is more than just GST: yes or no.”
He said an “Additional Earnings Allowance” could help make Guernsey more attractive to younger people, while the amendment also calls for measures to help people save for their first home.
Deputy Tom Rylatt said: “We want to seize this opportunity to ensure that our tax system is fairer, particularly for lower- and middle-income families, who have been squeezed hard by our current system and cost of living pressures.”
He said: “Having a 15% basic rate of income tax, combined with a social security contributions allowance makes a big difference.”
The amendment also calls for a long-term review of social security contributions and further support for families with the costs of raising children.
Listened to concerns about P&R’s proposals
Deputy Sally Rochester said: “We have consulted widely and listened to the concerns about P&R’s proposals.”
She said the amendment would strengthen the assurance process by giving the independent Fiscal Policy Panel, rather than P&R, responsibility for reviewing any proposed GST increase.
Deputy Rhona Humphreys said: “Everyone knows we need to build more, but we also need to help people save so they have a chance to be able to put down a deposit on their first house.”
Forward Guernsey said the amendment consolidated several proposals it had previously lodged in an attempt to shorten the debate.
Deputies are due to consider the amendment when the tax review returns to the States next week.
