Jersey to VAT zero rate food? The IFS should take note

Posted on

It's curious to note in the light of recent discussion here that Jersey is planning, according to TaxNews.com, to change its newly introduced goods and services tax (or VAT by any other name) so that food will be subject to tax at 0% in the future.

As the Jersey Evening Post has said:

The Council of Ministers meet on Thursday to discuss their response to huge rises in food and fuel costs.

It is widely expected that their response will be to drop GST on food and to freeze duty on petrol in the coming Budget.

But be clear: the die-hards of the Right, backed in no small part by Oxford economists were adamant during the debate about introducing GST / VAT in Jersey that it was essential that there be only one VAT rate because of the burden on business of having to differentiate products between different rates of VAT. And yet within three months of its introduction we are seeing that decision reversed because of the sheer political impossibility of imposing a tax on people who cannot afford to feed their families.

What works on the blackboard does not work in reality. The Institute for Fiscal Studies should take note.