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Treasury Minister's statement on GST

11 March 2011

The issue of excluding food and fuel from GST has already been comprehensively debated in the States at least 6 times. The first such debate was in 2005, the last as recent as December 2010 – that’s just 3 months ago. The Scrutiny Panel Review of the Fiscal Strategy Review did not suggest overturning tax and spending policies agreed by States during the budget debate; neither did it suggest removing GST from food or fuel.

These measures would lose the Treasury £8m in annual revenue and are not recommended by tax experts. A simple system, without exclusions, was the unanimous choice following a period of public consultation conducted by Crown Agents in late 2004.

Most countries that have introduced a GST / VAT system since the 1990s have arrived at the same preferred option. The UK’s VAT system is considered one of the most complicated in the world and adopting something similar here would cost the States £200K - £300K per year to administer. It would inevitably mean introducing a higher rate of GST.

Senator Breckon cites a range of ‘new and fresh’ information as the reason for reintroducing this issue to the Assembly. The vast majority of this information was available at the time of the budget debate. He cites some recently circulated figures comparing the level of taxes paid by companies and individuals. While there has been a shift from corporate to personal taxation, this follows a worldwide trend and is not new information.

Most developed countries gather revenue from a mix of direct and indirect taxation. In Jersey, indirect taxes are made up of Impôts and GST. More than 120 countries throughout the world use a form of GST and most include food and domestic fuel in the tax base. In the EU only a few countries zero rate food and the UK does not zero rate domestic energy.

During the 2011 Budget debate, the Assembly agreed a clear plan to maintain a strong, sustainable economy through modernising the public sector, boosting business and, only where necessary, raising taxes. All the alternatives were thoroughly debated and were rejected by the majority of members.

The 2011 Budget was a difficult one, but it will lead to long term dividends. We are on course to find savings of £65m per year by 2013, our public finances are strong and our economy will recover.

Senator Philip Ozouf
Treasury Minister

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