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The Tax Review: Phase 2

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Policy & Resources Committee - P.2022/112 - Debate on this item began at the 25th January Meeting and is continuing at 15th February Meeting

  • Original Propositions

    • These Propositions were submitted as part of the Original Policy Letter:
    • The States are asked to decide:                                                       
    • Whether, after consideration of the Policy Letter "The Tax Review: Phase 2" dated 28 November 2022, they are of the opinion:-
    • 1)        To agree that the projected financial position of the States of Guernsey is unsustainable and that measures must be implemented before the end of this political term to address the issue.
    • 2.
    • A)    To approve the development and implementation of a package of revenue raising measures designed to increase States' revenues by £50-60m by no later than the end of 2025 through:
      •         i.         A restructure of the Social Security Contributions system, as outlined in section 8, including that all contributors be entitled to an allowance set at the same level as the personal income tax allowance and be liable for contributions on all income regardless of source;
      •         ii.          The introduction of a broad-based GST at a rate of 5%, as laid out in section 6, with minimal exemptions and zero rating;
      •         iii.         The introduction of a lower rate of income tax at 15% that applies to the difference between the first £30,000 of an individual's income, as calculated for the definition of "gross household income" under the Family Allowances (Guernsey) Law, 1950, and the personal and other tax allowances, mortgage interest relief and deductions for pension contributions they are entitled to; and
      •        iv.           An increase in the Personal Income Tax Allowance of £600;
    • and to direct the Policy & Resources Committee to include appropriate transitional proposals in future States of Guernsey Annual Budgets if required to implement the above package of measures.
    • AND:
    • B)    To direct the Policy & Resources Committee to:
      •          i.         Prepare the States of Guernsey Annual Budgets for 2024 and 2025 to include no real-terms growth in revenue expenditure, excepting the budget of the Committee forHealth & Social Care; and
      •         ii.          Include proposals within the Government Work Plan 2023 to reprioritise initiatives for which funding has not yet been released to the extent necessary to limit the additional expenditure to deliver these initiatives over the remainder of this term to a maximum of £5.7m, being 1% of the 2023 General Revenue budget.
    • AND:
    • C)      To agree that, prior to the implementation of a GST:
      •          i.         Income support benefit rates are increased by the percentage equal to the rate of GST applied to pre-empt the expected impact of the GST on low income households;
      •         ii.          The States Pension and other benefit rates are increased by a rate equal to the forecast impact of the GST on RPIX;
      •        iii.          A cost support scheme is made available to households with a gross income of less than £28,000 who are not in receipt of income support at an initial rate of £450 a year for a single adult and £675 for a couple;
    • and to incorporate within the uprating of such benefits in the subsequent January, any adjustment necessary to align the change in benefits with the actual impact of GST on inflation should this prove greater or less than the forecast amount.
    • AND:
    • D)       To note the intention of the Committee for Employment & Social Security to adjust the ten year plan for increasing contributions each year, in light of the resolutions following the debate on the Tax Review, in its annual Policy Letter on Contributory Benefits and Contribution Rates.
    • 3)    If the package of measures approved in proposition 2 is not sufficient to raise at least £50-60 million per annum, to direct the Policy & Resources Committee to prepare the States of Guernsey Annual Budgets for 2024, 2025 and 2026 to reduce States' expenditure on public services by such amount necessary to put States finances in the position they would have been if that £50-60 million had been raised
    • 4)    To direct the Policy & Resources Committee to engage with industry and the other Crown Dependencies in order to develop proposals for raising further revenues from the corporate sector without unduly negatively impacting Guernsey's competitive position or compliance with international standards; this work to include developing proposals, which should be presented to the States for consideration no later than November 2023, for an alternative corporate vehicle or other appropriate form of entity or taxing structure which will be subject to income tax at 15% or such other rate or basis as the review may determine.
    • 5)    To endorse the intention of the Policy & Resources Committee to approve funding from the Budget Reserve to implement the proposals as outlined in section 11.
    • 6)    To direct the preparation of such legislation as may be necessary to give effect to the above decisions.
  • Amendments

  • Final Propositions (As Amended)

    • The following Amendments were carried 5, 8, 11, 14, 16 & 17
    • As a result of these successful amendments, the Original Propositions were entirely replaced. The Final Propositions (as amended) are available to view below. Voting on these propositions will take place after the completion of general debate and details of the votes taken will be published on
    • pdf icon Final Propositions (As amended) [338kb]



P.2022/112 - The Tax Review: Phase 2

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