P.2022/112 Proposition 2 - OPTION A (As inserted by Amdt 14 AND amended by Amdts 5 & 17)
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II
Committee
Policy & Resources Committee
Proposition
2. POLICY & RESOURCES' OPTION A
To agree and approve the following package of revenue raising and cost reduction measures which comply with the objectives agreed for the Tax Review and which will close the defecit by £80-90 million in total:
A) 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:
a. The introduction of a broad-based GST at a rate of 5%, as laid out in section 6, with minimal exemptions and zero rating, exemptions to include retail food and the exemption of clothes and books as sold by locally registered charities, such rate not to be increased for at least 10 years from the date of implementation; and amendment of the General Sales Tax (Enabling Provisions) (Guernsey and Alderney) Law, 2009 to limit the maximum rate of GST that may be provided for by Ordinance of the States to 5%, and inclusion in the Law provision for the approval of any resolution directing the preparation of legislation and any Projet de Loi intended to repeal or vary the relevant provision of the Law specifying the maximum rate of 5%, similar to that set out in Articles 3(4) and (5) of the Reform (Guernsey) Law, 1948 in respect of repeals and variations to that Law;
b. 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;
c. An increase in the Personal Income Tax Allowance of £600;
d. 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;
e. To include, within the Budget Report for 2024, a proposed policy to underpin any future changes in: personal allowances; the threshold for the lower rate of income tax; and the threshold for the withdrawal of personal allowances;
f. Prior to the implementation of a GST:
i. Increasing income support benefit rates by the percentage equal to the rate of GST applied to pre-empt the expected impact of the GST on low income households;
ii. Increasing the States Pension and other benefit rates by a rate equal to the forecast impact of GST on RPIX; and
iii. Making available a cost support scheme to households with a gross income of less than £33,000, 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 with a 30% supplement for households where all adults are above States’ pension age;
and incorporating 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;
g. Noting the intention of the Committee for Employment & Social Security to adjust the ten-year plan for increasing contributions each year, considering the resolutions following the debate on the Tax Review, in its annual Policy Letter on Contributory Benefits and Contribution Rates; and
h. Directing 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.
B) To direct the Policy & Resources Committee to:
a. Prepare the States of Guernsey Annual Budget for 2024 to include no real-terms growth in revenue expenditure, excepting the budget of the Committee for Health & Social Care;
b. Establish a Sub-Committee to identify and review essential community services and, working with Principal Committees and wider States Members, consider where efficiencies, structural change, cessation, outsourcing and/or commissioning of those services could deliver significant savings, and to incorporate these into a medium- term plan for delivering overall cost reductions of at least £10m over five years to be considered by the States no later than July 2024 for incorporation into the States of Guernsey Annual Budget for 2025;
c. Review the Capital Portfolio and pipeline in light of the outcome of the debate and report back to the States by September 2023 with recommendations for (i) any changes to scope or funding of the existing portfolio; and (ii) (if in the view of the Policy & Resources Committee thought appropriate) amending the assumption for the level of capital expenditure contained within Principle 6 of the Fiscal Policy Framework; and
d. Include proposals with 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.
C) To direct the Policy & Resources Committee to develop proposals for raising up to £20m further revenues from the corporate sector without unduly negatively impacting Guernsey’s competitive position or compliance with international standards, through engagement with industry and the other Crown Dependencies, which should be presented to the States for consideration no later than November 2023. This work to
include examination of all the options set out in Appendix 3 plus 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.
