Guernsey’s retailers have urged deputies not to rely on taxation alone to solve the island’s financial challenges, as a new survey found that more than 95% of businesses are “concerned” about the impact of GST.
Ahead of this week’s debate on tax reform, the Guernsey Retail Group (GRG) has written to deputies calling for greater focus on economic growth and public spending restraint alongside any additional taxes.
GRG said Guernsey could not secure its long-erm future through “taxation alone”.
“A stronger economy, increased productivity, greater private-sector investment, and the retention of more expenditure within the island must all form part of the solution,” it added.
The GRG is the second business group to warn the states to prioritise growth and reduce spending before increasing taxes in as many days.
The Confederation of Guernsey Industry (CGi) warned deputies prioritise “spending restraint and economic growth” over new taxes, like GST, while also saying income tax rises needed for form part of the solution.
A survey of 65 retailers found that 95.4% were concerned about the future of their business if GST is introduced, with 67.7% “highly concerned”.
Overall, 62 of the 65 businesses surveyed, representing 95.4% of respondents, expressed some level of concern about GST.
The GRG said the findings showed worries extended across a wide range of businesses, including firms that are currently viable and trading successfully.
Nearly 60% think firms could close or shrink
When asked what those concerns could mean in practice, 58.5% said GST could result in business closures or downsizing.
Others pointed to potential price rises, reduced profit margins, greater administration, delayed investment and reduced capacity to recruit or reward staff.
The group stressed that it was not presenting the findings as a prediction of widespread closures or job losses.
However, it argued that many businesses already face increasing employment costs, freight pressures, recruitment difficulties, regulatory requirements and intense competition from online and off-island retailers.
“The importance of the findings is that many businesses see GST as yet another significant challenge or headwind within an already demanding operating environment,” the letter said.
Growth must come first
The GRG argued that tax reform alone would not secure Guernsey’s long-term future, despite the scale of the States’ financial challenges and the need to fund public services sustainably.
Instead, it called for a package centred on economic growth, stronger business confidence and measures to keep people spending money locally.
The group’s key message is that growth measures should be introduced before any new tax burden takes effect.
“We therefore ask Members to assess the package against four fundamental questions,” the letter states, including what effect reforms could have on prices, employment, investment and business viability, and what measures will actively grow the economy rather than simply mitigate harm.
The GRG also urged deputies to consider spending controls as part of the solution, arguing that fiscal sustainability cannot be achieved through taxation alone.
“Guernsey cannot secure long-term fiscal sustainability through taxation alone.
“A stronger economy, increased productivity, greater private-sector investment, and the retention of more expenditure within the island must all form part of the solution.”
‘Mitigation is not the same as growth’
Although the group welcomed elements of the current proposals designed to soften the impact of reform on businesses, it argued that these measures do not create the conditions needed for economic expansion.
“Limiting potential harm is not the same as creating the conditions for economic growth,” it said.
Among its proposals is a Local Economic Contribution Rebate Scheme, which would recognise businesses that create measurable value through local employment, investment, training and workforce development.
The GRG also repeated calls for an impact assessment of the full tax package, greater support for business investment and stronger measures to ensure what it describes as fair treatment between local businesses and off-island sellers.
The latest warning from businesses comes as deputies prepare to debate Policy and Resources’ (P&R) tax reform proposals, which include GST at 3%.
