People in Sark have been invited to share their views on proposals to reform the island’s tax system.
The island currently has two main taxes, a property tax and a personal capital tax (PCT) – which is paid by anyone who spends 90 nights on the island.
Now the island’s government, Chief Pleas, is proposing modernizing PCT to make it “fairer and more sustainable”.
The new system would remove the ability for very wealthy people to pay a Forfait – a fixed sum based on the size of their property not their global wealth.
This means many people in Sark pay the same tax, regardless of whether they’re worth £250,000 or £250 million.
Instead Chief Pleas would introduce tax bands based on the value of residents’ global assets.
The government will hold two drop-in sessions for islanders to discuss its proposed changes, one on 28 January at the Mermaid Tavern from 17:00 to 19:00 and a second on 14 February at the Island Hall from 10:00 to 12:00.
Anyone who can’t attend can email their views to taxation@sarkgov.co.uk.
Investing in infrastructure
Chief Pleas said the new system would be fairer and would allow the island to pay for a “period of major capital investment”.
“Much of the island’s infrastructure was built decades ago and now requires urgent renewal to remain safe, functional and compliant with modern standards,” a spokesperson said.
How does tax work in Sark?
Sark has long been known by outsiders for the things it doesn’t have, like cars, paved roads and – up until 2008 – democracy.
And there’s one more thing Sark lacks. Unlike the rest of the bailiwick – and indeed most of the world – residents don’t pay income tax.
Instead Sark’s 560 or so residents pay two main taxes, property tax and a personal capital tax (PCT).
Property tax
The property tax is paid annually by the person ‘possessing’ (owning) buildings, and the amount varies depending on whether it’s used to live in, for business or agriculture.
The tax currently varies from £19.40 to £22.00 per ‘quarter’ – a measurement of the size of the building.
A typical three-bedroom residential home might be 40 to 60 quarters large, so the owner would pay between £776 and £1,164 each year.
Personal capital tax
Personal Capital is intended to be a tax on worldwide wealth and applies to working-age residents with assets over £125,000.
But currently residents can choose between several options, including paying a fixed minimum or maximum rate or declaring their worldwide assets outside Sark.
However, only one person opted to pay the maximum tax – of just under £11,000 – last year.
At the moment, residents have several options to pay less tax or to avoid declaring their assets.
These include opting to pay a Forfait of 2.5 times their property tax.
Which means a billionaire in a three bedroom house could pay less than £3,000 a year in PCT.
Last year, 154 people paid the Forfait – with the average amount being £2,755.
A further 93 people living in homes where the owner paid Forfait, paid an average of just under £550 each.
People unable to work for medical reasons can apply for an exemption – meaning they pay no tax – as can people over 69 or over with assets worth less than £150,000.
Other taxes
Sark also doesn’t have capital gains tax, sales tax or inheritance tax. One of the many reasons some high-profile multi-millionaires have been attracted to move there.
However, as well as property tax and PCT, there are some other – albeit modest – local taxes.
Sark has a property transfer tax of 7.5%, which is paid when buildings are sold.
There is also an import duty (Impôt) on alcohol, tobacco and some fuels.
And there are smaller taxes on things like tractors, shotguns, and bikes.