Guernsey’s proposed GST will already tax hundreds of items that would be VAT-free in the UK, including food, tap water and children’s clothes.
Now, people in Guernsey could be even worse off than friends and family in the UK – if the tax comes in – as the new Prime Minister Andy Burnham scrapped VAT on domestic electricity until the end of the UK financial year, next April.
Mr Burnham’s first major act as Britain’s PM was to scrap the tax on electricity – at 06:00 on his first full day.
The tax cut, which will come into force from 1 October, would “give people breathing space” and “put more money in people’s pockets”, the new Prime Minister said.
At the moment, UK households pay VAT on electricity at the reduced rate of 5% – compared to the standard 20% rate – so the tax cut will save a typical household about £45 a year.
While the tax break is currently only planned until April, if it was extended it could place Guernsey households at an even greater disadvantage compared to their counterparts in the UK.
What’s the situation in Guernsey?
Guernsey’s top political committee, Policy and Resources (P&R), has recommended introducing GST at an introductory rate of 3%, as part of a package of tax reforms, including on utility bills.
However, the proposals have sparked widespread opposition both in the high street and online, with protests in St Peter Port and Alderney, and a series of rebel deputies and business groups coming out against the unpopular tax.
Low electricity users in Guernsey already pay more for electricity than most of the UK, with a significantly higher standing charge.
However, people who use a lot of electricity are actually better off than they would be in the UK, based on 2025 tariffs.
There are of course two major ‘ifs’ here.
Guernsey hasn’t approved GST yet, and the UK has yet to decide if it will extend the tax break beyond the end of the financial year.
However, the move is yet another reminder to taxpayers in Guernsey, Herm and Alderney that GST could be more far-reaching than the UK’s equivalent.
