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Guernsey Considering New VAT To Solve Financial Woes

by Jason Gorringe, Lowtax.net, London
06 August, 2021

Guernsey lawmakers are to discuss the possibility of introducing a value-added tax system, at a debate scheduled for September 2021, it has been announced.

The introduction of a GST with either a five or eight percent rate is included in two of three options put forward by Guernsey's Policy and Resources Committee, which was asked to identify potential sources of revenue for the government. The alternative would be a three percent "health tax", levied through the social security system.

Given that the introduction of a GST would be regressive, the Committee has proposed that the levy's impact could be offset with a hike to the personal income tax-exempt allowance and changes to make the social security tax system more progressive.

Mark Helyar, Treasury lead for the Policy and Resources Committee, said: "This Review is about making sure we are clear about how we should raise revenues, if and when we need to. It doesn't mean we are going to raise revenue now, or even next year but we may need to eventually."

"Our current tax base is unsustainable. It is uncomfortably narrow with almost two thirds of our income derived from taxes and contributions charged against people's income. The number of older people in our community is increasing and so is the volume of pensions and care services they need. We also need a long-term solution to support investment in our islands' infrastructure - the borrowing agreed in the Funding and Investment plan will support our capital programme to 2025 but not beyond. Change is needed, but the question is, what will that change be?"

"In presenting these three options to the States, we are one step closer to ensuring that we have a sustainable tax base. But at this point, none of these options are a fait accompli. It will be for the States to assess these three options and provide direction as to the path that we should take."

Neighboring island Jersey already levies a goods and services tax with a five percent rate.

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