Comment on P.28/2009: Goods and Services Tax: Exemption or zero rating of foodstuffs and domestic energy

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A decision made (30/03/2009) regarding: Comment on P.28/2009: Goods and Services Tax: Exemption or zero rating of foodstuffs and domestic energy - amendment.

Decision Reference: MD-TR-2009-0044
Decision Summary Title:	Comment on P28/2009: Goods and Services Tax: exemption or zero rating of foodstuffs and domestic energy - amendment		Date of Decision Summary:	30th March 2009
Decision Summary Author:	Ian Coupland Business Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Comment on P28/2009: Goods and Services Tax: exemption or zero rating of foodstuffs and domestic energy - amendment		Date of Written Report:	30th March 2009
Written Report Author:	Steve Lowthorpe GST Director		Written Report : Public or Exempt?	Public
Subject: Comment on P28/2009: Goods and Services Tax: exemption or zero rating of foodstuffs and domestic energy - amendment
Decision(s): The Minister approved the comment on P28/2009: Goods and Services Tax: exemption or zero rating of foodstuffs and domestic energy - amendment to be presented to the States at the earliest opportunity.
Reason(s) for Decision: To enable the Minister’s comment on P28/2009: Goods and Services Tax: exemption or zero rating of foodstuffs and domestic energy - amendment to be presented to the States.
Resource Implications: Other than those detailed in the report there are no further financial or manpower Implications.
Action required: Business Manager to forward the comment to the States Greffe and request that it be presented to the States at the earliest opportunity.
Signature:		Position: Senator P.F.C. Ozouf Minister for Treasury and Resources
Date Signed: 30th March 2009		Date of Decision: 30th March 2009

Comment on P.28/2009: Goods and Services Tax: Exemption or zero rating of foodstuffs and domestic energy - amendment.

Goods and Services Tax: exemption or zero-rating for foodstuffs and domestic energy (P.28/2009) – amendment- comments

Presented to the States on XX March 2009
by the Minister of Treasury and Resources

STATES GREFFE

COMMENTS

The Deputy of St. Helier No 3 has lodged an amendment to P.28/2009 which seeks to add a third category of supplies, school catering, to those already listed.

There is a direct link between this and foodstuffs already proposed. The existing proposition seeks exclusion for foodstuffs using UK VAT liability treatment which allows zero rating for food “except a supply in the course of catering”. There are further refinements under the UK Law as to what is excluded from zero rating by listing under “Excepted Items” and what can be included under zero rating by listing under “Items overriding the exceptions”. This in itself gives some gives idea of the level of complications we have been desperately trying to avoid in the Jersey GST system.

Under UK VAT Law the liability treatment of schools meals/catering can be different depending on the contractual arrangements in place. The main options are as follows:-

If school meals are supplied under the same commercial arrangements currently used in Jersey then they are regarded as taxable supplies (currently subject to 15%);
If the meals are supplied by a commercial contractor directly to the school/local authority for onward supply then the supply by the contractor will also be taxable (currently subject to 15%);
If the meals are provided directly by an educational institution providing exempt education to its own pupils / students then the supply of catering they make can also be exempt; and
If the supply of education is non business, as in the case of most local authority schools, then the supply of catering will also be non business provided it is made at, or below cost.

Therefore the treatment we currently provide under Jersey GST although much simpler is not that dissimilar to UK VAT treatment. If the contractual arrangements/relationships, described in the proposition amendment, were in the UK they would be taxable under VAT.

I have submitted comprehensive comments paper on the main proposition P.28/2009 and under Section 11 “Other factors that need to be considered” refer to what is known as exclusion creep. This amendment is a clear example of exclusion creep – if we approve the zero rating of school meals under GST - then what next? We have consistently taken the view that the most cost effective option in Jersey is a simple broad based system of GST which enables to have a very low rate and targeted support for the less well off.

The Minister for Treasury and Resources urges States members to reject the amendment.