Guernsey's top committee proposes 3% goods and services tax as part of wider reforms

This latest proposal hopes to break the deadlock over GST. Credit: ITV Channel

Guernsey's Policy and Resources Committee has proposed a 3% goods and services tax (GST) as part of wider reforms to plug the island's financial black hole and support lower earners.

If approved by the States, the changes could come in from 2028.

The proposed package includes some good news, reducing the basic level of personal income tax to 15% for those who make up to £28,000 a year.

A 20% rate would be applied to all earnings above this threshold, while the personal income tax allowance would go up by £600.

According to the Committee, this would cost £28 million a year, but help those on low and average incomes.

Social security contributions would be adjusted under the proposed reforms, with a new allowance of £11,122 for employed and self-employed people, and an increase in employer contributions to 7.6% by 2029.

When they pay social security, those who are self-employed face a hike to 14.5%, while employees would see their contributions climb to 8.5%.

The rate that pensioners pay would also go up, to 4%.

The Committee says its recommendations would "improve public finances by an estimated £59 million a year, including a minimum of £20 million of expenditure reductions agreed by the States earlier this year and £39 million in additional revenue from a blend of different sources".

It adds: "The package is designed to help people on average and lower incomes ... while shifting the tax burden to those who can most afford it."

There would also be a 25% drop in fuel duty, saving the average driver £130 to £140 per year, and a new annual vehicle tax, also applied to electric and hybrid models, based on weight and emissions. This would range from £25 to £280.

Also proposed in the package is an extension of the 10% corporate tax rate to cover the entire profits of regulated businesses, and the Committee would consider extending this to construction and retail firms from 2030.

Lindsay de Sausmarez says the Tax Reform Package would improve Guernsey's financial position by an estimated £59 million a year. Credit: ITV Channel

Deputy Lindsay de Sausmarez, President of the Policy and Resources Committee, described the package as "a balanced, pragmatic and proportionate response to the financial challenge we face".

She said the tax reform proposals would reduce Guernsey's "over-reliance on income-based taxation, strengthening and diversifying our public finances in a way that raises more income from a wider variety of sources whilst also reducing the tax burden on those that can least afford it".

The Chief Minister added: "On the one hand, we urgently need to put our public finances on a stronger and more sustainable footing ... but at the same time we're really, really conscious that many people in the community are struggling to make ends meet."

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