Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax Regulations.

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A decision made (19/11/2007) regarding: Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax Regulations.

Decision Reference: MD-TR-2007-0124
Decision Summary Title:	Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax Regulations		Date of Decision Summary:	19th November 2007
Decision Summary Author:	Julian Morris - Policy and Research Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Oral		Person Giving Oral Report:	n/a
Written Report Title:	Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax (GST) Regulations		Date of Written Report:	19th November 2007
Written Report Author:	Steve Lowthorpe		Written Report : Public or Exempt?	Public
Subject: Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax Regulations
Decision(s): The Minister agreed that: the recommendation from the Corporate Affairs Scrutiny Panel regarding the review of the definition of charities should be accepted the attached “Response of the Treasury and Resources Minister to the Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax Regulations” should be sent to the Scrutiny Panel and presented to States Members.
Reason(s) for Decision: The Corporate Affairs Scrutiny Panel presented their third Report on the Draft Goods and Services Tax on 11th October 2007 and the GST Regulations were approved by the States Assembly at the beginning of November 2007.
Resource Implications: There are no financial or manpower implications.
Action required: Treasury and Resources Business Manager to: to send the attached Response from the Treasury and Resources Minister to the Chairman of the Corporate Affairs Scrutiny Panel prior to 20th November 2007 to make the necessary arrangements to present the attached “Response” to the States prior to 20th November 2007.
Signature:		Position: Senator Terry Le Sueur, Treasury and Resources Minister
Date Signed: 19th November 2007		Date of Decision: 19th November 2007

Corporate Services Scrutiny Panel Report on the Review of Draft Goods and Services Tax Regulations.

RESPONSE OF THE TREASURY AND RESOURCES MINISTER

TO THE CORPORATE SERVICES SCRUTINY PANEL REPORT

ON THE “REVIEW OF DRAFT GOODS AND SERVICES TAX REGULATIONS”

1. Introduction

My overall reaction to this Report is that it is a comprehensive, considered and well researched review of the draft Regulations. It is consistent with, and complements, the two previous reports on Goods and Services Tax (GST).

2. Findings in the Report

(a) Administrative and technical procedures in relation to the States businesses. – I am pleased the Panel is satisfied that the proposed procedures are in accordance with standard practice in other jurisdictions.

(b) Margin scheme for second hand vehicles – This scheme was previously considered and recommended in the Scrutiny Report on the draft Law (S.R.7/2007 paragraphs 99-108). The continued support for this scheme is appreciated. As stated, similar schemes for other types of second-hand goods will be considered on an individual basis.

(c) Refund scheme for Charities – I am very conscious and supportive of the work carried out by Charities and the special role they play in Jersey. As a result, I was keen to honour my previous commitments (the pay and claim scheme). The total package with exemption for supplies is probably the best anywhere in the world and certainly avoids the complexity under the UK Value Added Tax (VAT) system.

(d) Review of definition of Charities – Whilst I am not entirely sure that the Income Tax Office is the appropriate department to undertake such a review, I do agree that a review should be undertaken. While this review would not be retrospective, it would apply to future requests for charitable status in respect of the Income Tax Law.

(e) Non Governmental Charities Commission - as the Panel points out, there has been a consultation paper issued by the Jersey Law Commission. In addition to this, the Jersey Financial Services Commission has also carried out some work in this area. I would agree that the setting up on an independent Commission would be advantageous.

(f) Exemptions for childcare, private schools, and burial and cremation services – I believe that it is right and necessary to ensure equity in relation to the costs for childcare and the non-charity fee paying schools. In respect of the burial and cremation exemptions, as highlighted in the Panel’s Report, the exemption is targeted and manageable.

(g) Zero-rating of the conversion of non domestic buildings to residential use and the disposal of a business as a going concern – This addition to allow zero-rating in respect of the conversion was recommended by Scrutiny in their second Report. It provides a measure of equity in respect of those people who are doing a real, genuine conversion. The zero-rating on the sale of a business is a standard provision and was added to remove any ambiguity. .

(h) Zero-rating extension of hotel accommodation until 31st December 2007 – I reiterate my apology to the Panel for not informing them of this proposed Regulation sooner which prevented them from having the opportunity to fully the consider the implications. This was not intentional or deliberate. Due to the uniqueness of the industry, difficulties were being experienced in relation to the production of Jersey holiday brochures for next year - traditionally contracts are negotiated annually in July and the brochures printed around August/September. The hoteliers and tour operators were experiencing problems this year in respect of the inclusion/exclusion of GST - particularly as at that time the actual start date was not fixed. Under existing transitional arrangements already in the GST law hotels could zero-rate accommodation supplied to tour operators under non- renewable contracts. However, they would have to charge GST themselves when making the same supply directly to a customer. Naturally the hotels were not happy with this prospect.

The Regulations will now allow the supply of hotel accommodation to be zero- rated for a transitional period only (from the start of the tax 1st May until 31st December 2008). From 1st January 2009 all such supplies will then be subject to 3% GST. This treatment, which has been welcomed by the Jersey Hospitality Association is intended to provide a measure of equity for a finite period only.

Recommendations in the Report

The recommendation regarding the review of the definition of charities is accepted.

Conclusion

I accept the findings of the Panel’s Report and the recommendation as stated above. The Corporate Services Scrutiny Panel has been complimentary on the co-operation received from the Treasury and Resources Departments and I would like to thank them for their efforts and the work they have carried out in relation to the GST Regulations. I look forward to receiving their further input on the Financial Services Industry Regulations in due course.