Work to implement GST is already running about six months behind schedule.
During yesterday’s Scrutiny hearing, the President of Policy and Resources admitted that a goods and services tax is unlikely to be introduced in Guernsey before July of 2027, when a start date of 1 January 2027 had originally been mooted.
Deputy Lyndon Trott said any further delays to the implementation process would be down to the next States – to be elected in June – who may or may not endorse the introduction of GST.
Despite not backing GST himself during last year’s Budget debate, Deputy Trott said work has been progressing on its introduction – but it will be delayed.
“Our belief as a committee is that if the next Assembly continues to endorse GST, it’s unlikely to become functional until 1 July 2027, so we think that it’s slipped by six months, but we do not anticipate that it will slip further than that.
“Having said that, we are giving it the the emphasis and the priority that the States has directed us to give it, as if all five members of the Policy and Resources Committee believed it was the the right solution and voted for it. So there is no doubt that I’m comfortable with the amount of emphasis and importance we’ve given it.”
P&R were being grilled on work they’ve done during this term of office as well as the progress on work that had started under the previous P&R Committee which was replaced early last year after a vote of no confidence was lodged.
Deputy Trott had tried to bring in an additional 2% on income tax from this year to plug the deficit in the island’s finances, but instead the States voted to bring in GST at 5% – which the previous P&R had tried and failed to do.
Now the principal of GST has been approved, the States need to fine tune the details. The island’s Treasurer said that is why the start date has already been pushed back by six months.
“The (P&R) committee has considered several papers on the matter and has approved funding in order to progress the program. Resources have been recruited and project teams have been established. In terms of the detailed planning, there’s one key consideration that will need to come before the new States, which is whether GST is applicable to food or not,” explained Bethan Haines.
“It’s such a critical decision that until that has taken place, some of the other elements of the project can’t flow. And so that’s why we think that actually 1 July 2027, is a more realistic date, because the new States will need to decide whether GST is applicable to food or whether it’s zero rated.”
P&R President Deputy Trott explained further that if GST is added to food then the flat rate would be 5% on all goods and services. But if food is exempt from the tax then everything else would need to be charged at 6%.
He had already said in the States last week that he doesn’t think 5% GST is enough to cover the island’s financial problems though.
Yesterday, P&R Vice President Deputy Heidi Soulsby agreed.
“I didn’t vote for (GST), but I do believe that if we want to replenish reserves, it will have to go up,” she said.
“If we don’t want to replenish reserves, it won’t have to go up now, and that’s the difference. It would very much depend on whether we want to follow our fiscal rules or throw them completely out. We’ve got various rules that we want to maintain our reserves, and we’re already breaching that now. So it’s one thing or another. If it’s not GST, something else will have to give.
“And that takes me back to why we’re not raising revenues now. Well, the States decided to bring in a GST, which increases more of a burden on the taxpayer. And then on top of that, we had lots of deputies looking around saying ‘we could raise some more money from people here, raise more money from people there’.
“We’ve got to look at everything in the round. And I think that’s one concern I have, wit little bits and pieces being added and added, and not actually looking at the impact it’s having on the public.”