The people of Jersey have rumbled what 0 / 10 taxation means. If most companies pay no tax in Jersey and finance companies pay half what they have in the past then to put it simply there is going to be a mighty big hole in their government's budget when almost half that existing budget came from taxes on corporate profits. And they've realised who is going to fill it - they are.
That's why 19,209 of them signed a petition against the imposition of Jersey's new Goods and Services Tax that comes into force next year at 3%.
Let's put this in context. There are 91,000 people in Jersey. Knock out the children (say 25%) and that leaves 68,000 who can vote. That means 28% of all adults on the Island signed a petition against this new law.
And that's when it's at 3%. At which level it will not stay.
Despite which the law was passed - because the States of Jersey was told "there is no alternative".
In the light of that ask one simple question: how long is this sustainable?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
The below exert is from a paper that I submitted to the States of Jersey’s Corporate Services Scrutiny Panel earlier this year. Hopefully it outlines the unsustainability of of Jersey’s fiscal strategy.
The move to 0% corporate tax, the implementation of the Goods and Services Tax (GST) at 3%, 20% personal income tax, 20% means 20% personal income tax for middle earners, the £34,000 cap on social security contributions and the combined employer–employee social security contributions set at 12.5% means that by international standards, Jersey has very low taxes.1
In researching developed and developing countries with similar tax models to Jersey’s, we could only find one other that was similar to Jersey, that being Guernsey, who we believe is at a similar risk to Jersey of their fiscal policies being unsustainable. Other countries had at least one of its direct, but usually indirect tax tariffs set significantly higher than that of Jersey.
For example, the eight countries we researched had personal income tax levels set between 9% and 24%, corporation tax set between 0% and 24%, value added tax set between 5% and 20% (with an average of approximately 14%) and combined employer—employee social security contributions of between 20% and 48%.2
As you can see, the emphasis is on indirect taxation to meet public revenue requirements. We argue that by 2015 GST will be approximately 12.5% in Jersey. Our evidence for this is that the current global trend being driven by the big 4 accountancy-audit firms (KPMG, Ernst & Young, PricewaterhouseCoopers and Deloitte Touch), is for reductions in direct taxation. Especially as corporate tax is to be replaced by value added or goods and services tax, at a significant rate to meet the lost public revenue from cutting direct taxes.
For example, KPMG in a recent report, Corporate Tax Rate Survey,3 state that:
“from our past 14 years’ tracking experience it appears to be economically and socially desirable for countries to strive for lower corporate taxes.”
In addition, PriceWaterhouseCoopers in a recent report, Paying Taxes The global picture,4 state that:
“Tax Authorities worldwide are gradually migrating from direct taxation to the less visible indirect taxation”
They go on to say that:
“Evidence suggests that simpler tax systems promote economic growth and can help achieve a win:win for governments and industry.”
Indeed, they go on to state that:
“VAT/GST: The win:win taxation systems of the future?”
We find this last statement concerning, as a basic understanding of economic policy indicates that there is no such thing as a win:win policy; there are always winners and losers.
We also note that the mantra of, low taxes creates economic growth meaning that increased prosperity for those at the top pulls those at the bottom up unfounded. Evidence from a New Economics Foundation report, Growth isn’t Working,5 state that:
“Even in a relatively equal society such as the UK, the share of the poorest 10% of the population in income — or pro-poor growth — is only 2.8%, while that of the richest 10% is 28% — ten times as much.”