A business group says Guernsey should prioritise “spending restraint and economic growth” over new taxes, like GST.
The Confederation of Guernsey Industry (CGi) also said “income tax should form a central part” of addressing the island’s financial black hole, a view it had held for over a decade.
Garin Dart, CGi Chair, said: “If the States had taken the sensible decision to increase income tax temporarily when debating the 2025 Budget in November 2024, the island’s finances would be in a healthier position today.
‘GST will harm economy’
He said Deputy Charles Parkinson told the CGi in May that a 1% increase in income tax would raise £5m a year.
“Had this been increased by 3% three years ago, cumulative additional revenue by 2026 would have reached £45m and made a significant contribution to narrowing the funding gap.”
Mr Dart urged deputies to introduce a temporary income tax rise and “discard the proposed goods and services tax, which will harm our economy”.
While the CGi recognised that increasing income tax wouldn’t solve the island’s “funding challenges” in its own it was an “effective and straight-forward mechanism”.
Revenue Service woes
Mr Dart also challenged claims by Policy and Resources (P&R) that the Revenue Service could cope with administering an entirely new tax when it was struggling to manage “significant backlogs”.
He said the backlog was “far larger than had previously been realised” and had been “made worse by the States decision to introduce individual taxation”.
“Introducing GST before the tax backlog is cleared will add to the workload of the Revenue Service staff and the stress on its systems,” he added.
Instead, “collection systems already existed” for income tax, so changes could be “implemented quickly and rates adjusted without creating an entirely new tax administration”.
“Increasing income tax temporarily while the tax backlog is dealt with will also allow us time to ensure we have a true picture of the island’s fiscal position before introducing new taxes.”
Concerns about modelling
The CGi, which represents about 60 local firms employing 1,600 people in total, said it was also concerned about the impact of GST, after P&R released updated modelling last week.
The new modelling showed that the amount of money GST was estimated to raise has fallen from £39m to £36m, it said, so may not raise enough money.
“It has also become clear that P&R has not brought the States together to back its plans, and our government remains divided,” the CGi added.
States doesn’t have ‘appetite for savings’
Mr Dart accused the States of having “little appetite to make savings, despite clear messaging from the public and businesses that this is needed”.
He said also highlighted the States’ historic track record of going over its own budgets.
He added: “While P&R has proposed 1% efficiency savings across the public sector over three years, ‘priority-based budgeting’, reviews of expenditure and identifying efficiencies and opportunities for expenditure reduction, it has been reported that four States committees are forecasting overspends for this year, with HSC wanting to spend tens of millions of pounds relocating multiple service areas to Raymond Falla House.”
The group was urging deputies to “be mindful” of spending and “to act now to cut costs before introducing new taxes”.
It also wanted measures to boost the island’s economy, alongside “increases in company registration fees, corporate taxation and the introduction of deferred pensions as part of a broader package of fiscal measures”.
Mr Dart also challenged claims earlier in the year from some other industry groups that all businesses support GST.
He finished by calling on deputies to “take the time to consider all amendments” rather than rushing a decision in three days.
