When Jersey first planned to move to a zero percent corporation tax system, with funds lost being replaced by a sales tax equivalent to VAT I predicted two things relevant to what follows.
The first was that the fiance industry would not grow at anything like the rate Jersey then forecast. That growth forecast was critical to filling the tax gap Jersey intentionally created.
Second, I predicted as a result that the new sales tax - called GST - would be charged at much higher rates than the 3% first proposed. Indeed a few of us had a wager on what it would be a decade later - my forecast being 12.5%. This, I said, would be necessary to fill what I called a 'black hole' in Jersey's finance, which it was easy to predict would reach £100 million a year.
The GST rate has already risen from 3% to 5%, hitting the poorest in the island hardest, of course, and all with the intent of subsidising the tax abuse industry located in the island.
So it was interesting to note a report in the Jersey Evening Post yesterday saying:
GST could double by 2015 if ministers' ‘highly optimistic' economic recovery targets are not met, employers have warned.
The Chamber of Commerce say that if the economy remains flat over the next three years, a new ‘black hole' of £67m will open up — the equivalent of raising GST to almost 10%. And the business lobby group says that with spending rises planned from 2013 to 2015 under the Medium Term Financial Plan after three years of cuts, the question is ‘are we really in control of States spending?'.
The States three-year spending plan proposes a 12% rise in department budgets by 2015, along with £222m worth of capital spending. Although no tax rises are proposed, a further £26m per year will be found for the Health department — and ministers say that they have balanced the books, with a small surplus of just under £1m predicted over the period.
Those employers are right: Jersey cannot and will not balance its books. It's trust business is under serious threat now due to new US and UK laws. Even its tourism is down. Jersey's economic model has failed, as I predicted. And the people of Jersey will pay a very high price for it.
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[…] I’ve just noted the perception, now widespread, that Jersey’s finances are unsustainable unless local people, who are not that well off, are to be heavily abused by demanding more tax from them. No doubt the expatriate financiers in Cayman will now demand that the same happen there – and I am sure additional sales taxes on the local population will be their proposed solution to the crisis they face. But all they’ll be doing is inciting the sort of backlash against tax haven mentalities that now seems likely worldwide. […]
You’re right – but you don’t need me to tell you that. It is, certainly for me, a very worrying time in Jersey right now.
No matter how much our beloved (yes, I am being sarcastic) treasury minister Philip Ozouf tells us that “the books have balanced”, and that “spending is under control”, and “that we are well-placed to survive this period”, and “spending cuts are on track” – you know that it’s all a pile of <>.
Jobs are going left, right and centre in Jersey right now – and that means, in itself, two things – fewer income tax receipts and more benefit payments. Put those two together and you have less spending on the High Street… and then we’re into vicious circle territory.
The JEP newspaper reported yesterday that retail sales are down – to those in government that this comes as a complete surprise to should be asked to stand down.
I have a feeling that within the next two years, the Jersey bubble will pop and, as you say, the Jersey people will pay a high price for it. I don’t see any plan B forthcoming – it’s as if the States have buried their heads in the sand.
I stand to lose my job within the next 12 months – that is 12 months if I am lucky. I think my plan of action will have to be to sell up and leave this beautiful island, my home.
Andy I was born there and my uncle’s name is on the war memorial at Grouville. My sister still lives there and two of her children are without jobs. Another works for a a bank. It grieves me what is happening there. I do hope you can manage to stay there.
So during the last few years of recession the GST has gone from 3% to 5%….Wow not.
Every other Western State has also increased this kind of taxation including the UK so how does this reflect on Jersey exactly? The rest is just your hope that the budget will fall apart and taxes rise without any solid indication yet that this will happen.
But the larger point for all these tax havens such as Jersey, Caymans, BVI etc is exactly what are you suggesting they replace their current economy with?
It may be good for the larger nations if they all go back to fishing, growing bananas and the odd bit of tourism but how is that going to help the local population. What is your plan for these states other than falling on their swords and all becoming poorer?
It is inevitable that these places will a) lose significant population – mainly epxats anyway b) move to tourism c) be poorer d) be given grants to get them through the transition
It’s worth paying significant grants for the ending of the abuse
Richard (not murphy) says “The rest is just your hope that the budget will fall apart and taxes rise without any solid indication yet that this will happen.”
And fron that I take you believe Jersey’s economy will grow by 5% a year for the next three years. The Bank of Englad have just downgraded their forecast for next year to 0%.
Now who should be believe, the Jersey politicians who said zero ten would not create a £100 million black hole or some one from the UK who is probably a bit more clever?
I’ve made my decision, what’s yours? Ozouf’s 5% per year or the BOE 0%?