If GST is introduced, the current Policy and Resources Committee will do all it can to prevent future States increasing the rate.
Deputy Gavin St Pier said using a little known or used States rule about law changes needing a ‘super majority’ could allay fears about the proposed new charge rising.
But the Vice President of P&R acknowledged that there is a lack of trust in the States which has left many people concerned that the proposed 5% introductory rate might not last long.
“We have to start from the constitutional starting point, which is that no States can bind its successor,” he admitted.
“So the reality is, these are decisions which do need to be made by the elected politicians of the day, and who knows what the future circumstances of the island are. But what we can realistically do is acknowledge the concern, which I think is a real concern looking at the track record of jurisdictions elsewhere, that GST is felt to be a tax which can be quite readily raised.”
Deputy St Pier said one of the keys to ensuring a rate of GST is not increased lies in keeping it as simple as possible – which is partly why P&R says it should be levied on retail food sales if it is introduced.
“By having it as broad based, or in other words, having it as simple as possible, therefore covering pretty much all goods and services, that helps keep the rate as low as possible,” he said.
“As soon as you start introducing exemptions and exceptions then you have to have a higher rate in order to bring in the same amount of revenue. We’ve seen that just by looking at food.
“If we’re aiming to raise around about £50 million net of all the mitigations, then in order to deliver the same amount, you’d have to have a 6% rate rather than a 5% rate. So I think the first thing is actually recognising that the way you keep the rate low is by having it really, really simple, and as broad as possible. And then I think the second thing is to try and build into the legal architecture some hurdles that will need to be jumped by any future States so that actually, it is not an easy decision (to increase it). It may be a valid decision at that time, but it’s a decision that will require real challenge at the time, and that is where we’re coming from in seeking to build those protections into the law so that it cannot be an easy decision.”
A ‘super majority’
States decisions – including introducing new laws or changing existing ones and raising charges or duty levied – can be approved by a simple one person majority.
However, when it comes to GST – if it is introduced – P&R will try and persuade this States to agree that future States will need a ‘super majority’ to increase the rate.
That mechanism already exists in the island’s Reform Law, and Deputy St Pier said it could be used to offer protection against rising GST rates.
“We do have a super majority which exists in the Reform Law which is, if you like, Guernsey’s basic constitutional law. Now, if there are any changes to that Reform Law, there is a mechanism, which, in essence, the starting point is that you need a two thirds majority.
“Now, whether that’s the right mechanism, or whether there’s some other mechanism, that is the kind of detail we need to think about. But the principle being that it isn’t just half the States plus one person which is how most decisions are made.
“The point is, it’s recognising that this particular decision is a significant decision, and therefore, is it worthy of having some extra guardrails put in around that decision, and that’s our thought process.”