Sark’s government has admitted that life in the island may get more expensive now Guernsey’s decided to introduce a goods and service tax, even though Sark is not bringing in the new levy.
Chief Pleas has issued a statement acknowledging that “residents are rightly concerned” about the impact of the new consumption tax being brought in by a separate political jurisdiction.
The close ties between the Bailiwick islands have already been addressed in the planning stages but “there is still much work to do” before Sark agrees to any final arrangements with Guernsey, said the island’s government.
Guernsey’s GST
Guernsey’s States of Deliberation backed the Policy and Resources’ Tax Reform package by a 22-17 majority last week.
The States of Deliberation is made up of 38 Guernsey deputies and two representatives of the States of Alderney.
The approved package includes the controversial ‘Goods and Services Tax’ – known as GST – that has long been suggested as a way of addressing Guernsey’s growing financial deficit.
22 of Guernsey’s 38 deputies voted in favour of the tax package, including GST, with 14 voting against it, and one abstaining.
The Alderney representatives vote on all matters before the States of Deliberation, even where they do not impact Alderney.
On this occasion, the tax decision definitely included Alderney as it is financially tied to Guernsey under the 1948 Agreement.
Both Alderney Representatives voted against the Tax Reform package but as it passed by a majority it will be adopted in Alderney as well as Guernsey from 2029 onwards.
This means all goods and services – except those listed as exempt or zero rated – will incur a 3% tax from the implementation date.
Guernsey and Alderney residents will also benefit from the mitigations agreed which included new tax and social security allowances and a lower rate of income tax for lower earners.
Alderney bill-payers will also be exempt from paying GST on utility bills after a successful amendment lodged by their representatives.
No vote for Sark
Sark did not get a vote on GST being introduced in Guernsey, because unlike Alderney it is not financially tied to Guernsey and the tax won’t be rolled out in Sark too.
Chief Pleas has warned that there will be an impact though and costs will rise in Sark as a result of the decisions made in Guernsey.
In a statement, Chief Pleas confirmed that “preliminary discussions” have been held between Sark’s Conseillers and their Guernsey counterparts “over the past few years” as the larger island repeatedly grappled with the idea of whether or not to introduce GST.
These talks focused on the “potential implications of GST for Sark” with “some bespoke measures for Sark” that “could help reduce the impact”.
One idea discussed included ensuring GST is zero rated from essential wholesalers
of food and fuel – both of which are already more expensive in Sark than in Guernsey, but have to be imported through Guernsey where GST will be levied in the future.
“GST will inevitably have some effect on Sark as most goods arriving here pass through or are purchased from Guernsey,” acknowledged Chief Pleas.
“There is no solution that entirely removes the impact, be that a formal goods border between our islands or additional costs that may be incurred when shopping in Guernsey.
“Our priority is therefore to ensure that any arrangements minimise this impact for residents and businesses.”
Rebates
Chief Pleas has maintained that the movement of people and goods between Sark and Guernsey “must remain as frictionless as possible” after GST is introduced.
That is due to happen in early 2029 – with work ongoing before then to finalise arrangements.
Chief Pleas will use that time to continue working with Guernsey counterparts to minimise the impact on Sark.
This includes the introduction of a new rebate payment to offset the GST paid by Sark residents and businesses on goods and services purchased through Guernsey.
Chief Pleas said this could be used to offset rises in basic tax rates in Sark.
“There is still much work to be done before any final arrangements can be agreed and
any proposals affecting Sark will ultimately require debate and approval at Chief Pleas,” said the government.
“We are committed to reaching the pragmatic solution for Sark residents throughout this process and our objective throughout will be to minimise the impact on islanders and secure the best possible outcome for Sark.”
