If a goods and services tax is introduced, all food sales will be included with a flat rate of 5% now formally suggested.
Work on introducing ‘GST+’ – a group of measures to include income tax and social security reforms – has been ongoing since the last States backed it in late 2024.
However, the current States last year agreed to form a subcommittee to look at alternative ways of solving the island’s financial problems.
Policy and Resources has now published the first policy letter formalising the introduction of GST+ if an alternative can’t be found.
Deputy Gavin St Pier says it’s essential this planning continued to ensure the necessary preparatory work can be completed to guarantee efficient introduction, if that is the States’ final decision in June.
“It’s important to be really clear that no final decision has been made on any of the tax reform options the States may ultimately decide to implement,” he said. “However, the previous States directed that preparatory work on the implementation of the GST plus personal income protections package of measures be continued, pending a final decision of the States.
“That final decision will be made before the end of June, once the work of the Tax Review Sub-Committee has concluded and a range of options are presented to the States. The Sub-Committee’s work is progressing well and it will shortly be publishing a consultation relating to alternative corporate tax reform options.
“As part of the preparatory work taking place, we need the States to decide some of the detail of what that package of measures includes so that it could be introduced without further delay, in early 2028, if the Assembly decides to include it as part of the final proposals on tax reform. P&R is in no way pre-judging either our final recommendation to the Assembly, or its decision.”
Including food in the 5% GST rate will mean the charge is levied on all food sales in supermarkets, other shops, and restaurants.
If the States doesn’t agree by a majority to levy GST on grocery sales then the alternative would be a flat rate of 6% across all other goods and services, said Deputy St Pier.
“One of the decisions we need from the States is whether GST, if it were to be implemented, should be a lower rate and apply to most goods and services including food, or whether it should be a higher rate but exclude food sold in retail outlets,” he explained.
“Our recommendation to the States is that a consistent lower rate including food is the best and most efficient approach. It is the clear preference of the business community,” he added.
“The detailed analysis we have undertaken, shows that zero rating food while having a higher rate (6%) of GST on all other goods and services does not in fact result in lower overall costs for low-income households. This is because of the package of the protections included in the proposals. These include adjustments to pensions and benefits plus the Essential Cost Relief Payment Scheme. Although, it may be that better alternatives emerge from the Tax Review Sub-Committee, in the meantime, 60% of the net revenue raised in this tax reform package would be from sources other than local households, such as the corporate sector and those visiting the island. Taking all the measures together in this tax reform package mean that most people earning less than £50,000 a year will be better off.”
