GST plans approved as income tax rise rejected

Plans for introducing a goods and services tax (GST) are to be worked up as an income tax rise was rejected by the States of Guernsey.

Policy & Resources (P&R) will now start working on tax reforms including a 5% GST, lower income tax rates for earnings under £30,000 and social security reform , to start in 2027.

President of P&R Lyndon Trott warned without the £34m raised by the temporary income tax increase, there would need to be cuts to some projects .

In 2023, Guernsey's States twice rejected plans to introduce a GST .

In an interview in October, Trott said rejecting the income tax increase, which was estimated to bring in £34m, would mean the project to extend the hospital and build more housing could be cut .

It is expected P&R will bring an emergency budget in the early part of 2025.

Twenty deputies voted to support the GST package, with 15 voting against it.

'Referendum on GST'

During debate on the 2025 budget Vice-President of P&R Heidi Soulsby told her colleagues the only way to bring the money needed to fund public services now was to increase income tax.

She said "we won't get a bean from GST for at least two years".

One of the leading campaigners against a GST Deputy Carl Meerveld said this decision would turn the 2025 general election into a referendum on GST.

He said "I had hoped deputies had listened to the thousands of people who campaigned against GST, apparently, they have short memories and now GST will become the primary issue at the next election".

Scrutiny Management Committee President Yvonne Burford agreed that this will lead to a "single issue election".

Which way did they vote?

Deputies Peter Roffey, Peter Ferbrache, David Mahoney, Andrea Dudley-Owen, Mark Helyar, Neil Inder, Rob Prow, Sasha Kazantseva-Miller, Jonathan Le Tocq, Bob Murray, Andy Taylor, Al Brouard, Simon Fairclough, Nick Moakes, Victoria Oliver, John Gollop, Sue Aldwell, Lester Queripel and Sam Haskins supported the proposals for tax reform including a GST.

Alderney rep Steve Roberts voted for the proposal, his compatriot Alex Snowdon abstained.

'Cost me the election'

Last time GST was debated by Guernsey's States, Deputy Sasha Kazantseva-Miller voted against proposals to introduce the tax.

But this time around she supported the proposals: "This could cost me at the election, but I think GST is the only way forward".

Deputy Lester Queripel also U-turned on his previous position, as he previously campaigned against a GST.

He said: "I'm voting the way I'm voting as I believe it's the best thing to do for the community in the short, medium and long-term".

Proposals to increase income tax for two years were criticised by former Chief Minister Peter Ferbrache. He labelled the move by P&R as "dangerous in the extreme".

He added he did not think the public would believe this was a temporary measure.

Deputy John Dyke joined Ferbrache in his criticism: "We've had the 20% income tax rate for 60 or 70 years. It's been the basis of our financial offer to the outside world. If we start messing around with it, nobody will believe it's temporary."

Deputy Liam McKenna was equally scathing of plans to increase income tax: "It is beyond belief we are looking at putting income tax up, while Jersey stays at 20%. I don't believe this will be a temporary increase".

Amendments approved

Proposals to ensure Guernsey residents can stay in new temporary accommodation were approved.

P&R had initially proposed to build new temporary villages for construction staff and keyworkers.

States members also backed a proposal from Deputies Rob Prow and Neil Inder to give tax breaks to small distillers and brewers.

A proposal to give tax breaks to small landlords was also approved by deputies.

While an attempt to extend the period for the withdrawal of mortgage interest relief on people's main homes was also approved.

Following the vote a consultation between P&R and the island's public sector unions will also take place looking at pay and conditions for staff.

That scheme replaced an earlier decision by deputies to look at ensuring new States employees are appointed on a static pay rate and that posts that are vacant for six months are closed within the public sector.