How could deputies change Guernsey's tax system?

As deputies prepare to take on what could be a landmark debate on the future of Guernsey and Alderney's tax system what will they be considering?

After last year's election, States members agreed delivering meaningful reform of the island's tax system was one of the government's super priorities for this term.

However, the proposals from Policy and Resources (P&R) face 21 amendments and a sursis, which could see debate delayed until 2028.

The island's top politicians and business leaders have warned against any delay and urged the States to make a firm decision on the way forward.

P&R has argued the changes are needed to ensure public services are funded moving forward, diversify Guernsey's taxbase and ensure lower earners are supported.

About 250 people turned up at Market Square at the weekend to protest against the proposed reforms.

After a review of the island's corporate tax system and how more money could be gathered from businesses P&R published its tax reform package which included a 3% GST.

Officials at the treasury said the package would raise about £40m a year.

The island's top committee said the aim of the package was to give lower earners more money, fund public services moving forward and diversify the tax base away from income tax.

P&R's tax package is made up of a 3% GST which officials estimate will bring in £55m a year.

Alongside that are mitigations to ease the burden on people on low and average incomes.

Those include a 15% rate of income tax on earnings up to £28,000 and an increase in personal income tax allowances of £600 to £15,800.

A new social security allowance would be created meaning employed and self-employed people would not make any contributions until they have paid £11,122 each year.

If approved by politicians fuel duty would be reduced by 25%, with P&R arguing that with more electric vehicles and fuel efficient vehicles it was a declining revenue source.

In its place annual motor tax will be reintroduced based on weight and emissions ranging from £25 to £280 with the median charge being about £132.

The new tax package would start in 2028 if deputies support it this week.

A number of proposals from deputies look to add things to P&R's tax package or direct further work, through amendments to the proposals.

Deputies Andy Sloan and Munazza Malik want to see P&R investigate the introduction of a "child responsibility tax allowance", effectively further tax breaks for people with children.

Alongside former Deputy Chief Minister Mark Helyar, Sloan is also proposing an investigation into a flat tax rate, which he suggested to the BBC could be 15% across income and corporate taxes.

They have joined forces on another proposal led by Helyar which looks to water down some of the changes to income tax and social security rates.

Sloan's opther proposal is similar to what he asked for at the budget debate last year, in that he is demanding spending restraint, but this time around he is asking the States to agree growth in total States expenditure should not exceed inflation over the financial years 2027, 2028, and 2029.

Deputy Gavin St Pier is set to have another go at trying to get the Lieutenant-Governor - the King's representative - to pay income tax, with the support of Employment and Social Security President Tina Bury.

Forward Guernsey, the island's only established political party, has put forward a proposal to ensure that the mitigations, like changes to income tax rates and allowances, in P&R's package change with inflation over time.

Deputy Haley Camp has joined forces with Deputy Garry Collins in an attempt to force the creation of a savings and service optimisation programme which would set out the exact savings being made by the States.

The two Alderney representatives have lodged a proposal to exempt electricity and water bills on the island from any future GST.

A late proposal from Bury, supported by her Vice-President Jayne Ozanne asks P&R to look at wealth and asset-based taxation measures as potential revenue-raising tools.

After struggling for a few weeks, Deputy David Goy found a seconder to bring his "productivity incentivisation tax" to the States.

Seconder Deputy Aidan Matthews said it deserved to be debated, but he was not inclined to support it.

The proposals aim to investigate taxing under-used property, wealthy low-tax contributors and luxury assets, while encouraging productive economic activity and protecting lower and middle income households.

That debate looked to have been settled earlier this year after 24 States members voted to make sure food would be included in a future GST.

Matthews is looking to reopen that debate with an amendment.

Home Affairs President Marc Leadbeater is also attempting to exempt food produced or grown by small independent suppliers from a future GST.

Leadbeater's proposal does not specify the exact criteria for this, as it would be set in the future by P&R if approved by deputies.

Collins has put forward a proposal alongside Camp to create a new special advisory committee which would review States spending.

This "appropriations committee" in the words of Collins would be given £100,000 to complete its work by the end of December 2028.

It would be made up of seven members selected by the States before the end of September.

In 2024 the States voted to approve a package of measures including a 5% GST, social security reforms and changes to income tax.

Politicians on P&R say if their proposals are voted down, that resolution will not carry forward and work on the introduction of a GST will stop.

There is precedence for this, with a vote of no confidence leading to the deposition of a previous P&R in 2023.

Deputy Charles Parkinson proposed it after the committee lost its tax reform proposals which included a GST.

In the end 23 States members voted to eject the committee led by Deputy Peter Ferbrache.

This time around Parkinson's former ally, anti-GST campaigner Deputy Liam McKenna has said if this P&R's plans to introduce a GST are voted down, he will move a vote of no confidence.

P&R has dismissed the move as "politics".

McKenna has also lodged three proposals, to take GST off the table, to put the issue to a referendum and to delay debate until 2028 to allow the Revenue Service to catch up on its backlog.

If States members run out of time during their meeting on 15-17 July then debate will continue at the next meeting on 30 September.

They can vote to debate it earlier on another day or days though and could select to sit at the weekend. Ultimately it is at the discretion of deputies, but would need court staff and the presiding officer to agree to work.

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