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Guernsey Discusses Benefits Of New Consumption Tax

by Mike Godfrey, Lowtax.net, Washington
28 May, 2014

In recent comments, Treasury and Resources Minister Gavin St Pier has indicated that Guernsey will likely proceed with the introduction of a consumption tax. He has suggested it can plug a gap in tax revenues and potentially fund future direct tax cuts.

Speaking to the Guernsey International Business Association, St Pier said a consumption tax could fund personal income tax cuts to attract more talent to the island:

"Diversification of our tax base presents Guernsey with a number of opportunities. These opportunities include lowering both the direct and total tax burden of the hard-working majority of the population in middle income brackets by increasing their tax-free income tax allowances; providing a more stable and sustainable tax base to provide the services which many in our community and many other jurisdictions now regard as 'standard,' but which we will struggle to provide so long as we seek to fund everything from an increasingly narrow tax base; and increasing the contribution from that part of the corporate sector, which consumes goods and services in our islands but no longer pays corporate income tax," he said.

He added: "If in due course any proposals are tabled for a broader-based consumption tax, it would be essential that they are accompanied by measures to ameliorate [the impact] on lower incomes."

A consultation paper, released by the Government in March, said that the Treasury would investigate a broad-based consumption tax as part of a larger tax review, and present a report to parliament no later than June 2017, to potentially introduce such a tax no earlier than 2019.

Guernsey does not currently levy a sales tax or VAT, unlike the other Crown Dependencies, Jersey and the Isle of Man, which both levy VATs.

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