I have long forecast that as a result of continuing financial deficts arising from Jersy's decision to impose a 0% tax rate on companies it would eventually go bust. I havenever seen reason to change that opinion and although the latest budget for Jersey shows it almost breaking even that is stated before the impact of the latest decision on its tax system from Europe, before the impact of LVCR going and after using the most optimistic assessment of growth and likely tax revenues - which the budget itself shows could be massively overstated.
Now BBC Jersey reports:
Jersey's treasury minister is urging that £40m in government funds to help Jersey through the recession must be used.
Senator Philip Ozouf wants to make sure the cash for capital projects, from the Fiscal Stimulus Fund, is spent in 2012.
With high unemployment and the economy shrinking by 5% in 2010, the minister said it would be a boost for business.
No Philip: that's not true. What this says is you know your books aren't balancing and you've got no choice but use the rainy day fund now before the inevitable faliure I forecast happens.
It's actually quite sad to see what I so accurately forecast as long ago as 2007 panning out in reality largely because it is so unnecessary. There is a Plan B for Jersey - but it's always been ignored.
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Richard: It must be both depressing and exasperating to watch the people of Jersey suffer whilst the “leaders” ignore sound and practical advice delivered more than four years ago. Yet ANOTHER unfortunate example of how a small and selfish elite, obsessed with accumulating wealth at any cost, can cause cross border financial devastation
Tax havens are inexorably doomed; their (so-called) governments know this as does the financial sector given sanctuary there — but this does not prevent their monkey business continuing to the bitter end in their repulsive Alice in Wonderland fantasy lands.
Similar financial “difficulties” face the Isle of Man.
Guernsey too — although here the maize of intrigue, financial wizardry dressed as incompetence, is so impenetrable that it may take longer to unravel.
When do you envisage Jersey going bust by, Richard?
It’s a very worrying time for us here in Jersey with that incompetent Ozouf at the helm.
Several years yet before you’ve finished plundering all the reserve funds and pushed GST beyond tolerable limits
What’s an “intolerable” level of GST? Current rate is 5% which brings in around £130m a year. UK rate is 20% temporarily from 17.5%. I’d say it was unrealistic to exceed the UK rate. Any rate below that is a plus. To allow for freight charges on imported goods I’d say 15% should be the top rate. An increase from 5% to 15% would bring in an extra £260m. Problem solved. Jersey could then take a lot of low earners out of the income tax net altogether.
I can just hear the arguments now. GST is regressive. Maybe, but in that case its regressive in the UK and all over Europe where every country has a high rate of VAT. The tax burden on the Jersey population would be too high? Really? A top rate of 20% income tax, no CGT, no IHT, no Council Tax. Not high at all.
Where’s the problem?
The problem is very simply stated
It is called poverty for many in Jersey who already suffer one of the highest costsof living in Europe
I note your contempt for those people, but I care about Jersey and the majority who live there
You just want to exploit them to allow the continuation of abusr
Richard
How can it be poverty? Did you not notice my comment that it would enable many low-earners to be removed altogether from the income tax net. They could be better off than they are at present. Looking after the low earners is hardly “contempt for those people” as you state. And I can assure you that the “majority who live there” are not “poor” by any standard definition applied elsewhere. The minority in the lower decile of the population would be far better off.
How did the UK government look after the “poor” when it raised its VAT rate from 17.5% to 20%?
And no, I don’t “just want to exploit them [whoever “they” are] to allow the continuation of abuse”. I want to see Jersey’s finances rebalanced with a responsible finance industry continuing to exist, as without it Jersey will become a backwater as there are no alternative viable industries which can replace finance. And no, your Plan B is not the answer. You have completely misread the global market demand for what you advocate in Plan B. It would barely replace 5% of Jersey’s finance industry where privacy and confidentiality from the prying public, whilst being tax-compliant, is far more important and far more prevalent than you are willing to accept. You’re an economist apparently. You therefore know about supply and demand. Without demand there is no market.
If your idea worked Ozouf would do it
He hasn’t
because it doesn’t
Not least because you ignore the situation of non- taxpayers who would be massively worse off
Ozouf has the brains of a rocking horse. Nobody has any idea why he thinks the way he does! What he does and doesn’t think is no benchmark.
Actually I haven’t forgotten about the low earners who are non-taxpayers. That level of GST would provide for income support for those who genuinely need it on a means-tested basis. They would be better off than now.
Have you published all your data?
Where?
Richard
No – not published. Its hardly rocket science though that a far better distribution of the tax burden can be achieved if the GST level is raised AND if coupled with tax credits, income support etc where its necessary. Those who earn more, spend more, and therefore pay more GST than the lower earners.
Ah
So you have no data
Go away and do some work on it
Then prove why it works and how
Its a suggestion Richard, not a thesis.
Rather like your Plan B which a complete lack of market research and feasibility study didn’t prevent you from promoting as being Jersey’s solution!
At least I had the decency to write it down
You can’t veen be bothered to do that
You neednt have bothered. Without market research it has absolutely no credibility. I’m astonished that you are so actively pushing it without first establishing its viability.
I know it’s viable
Real change can never be market researched
Don’t you know that?
Do you live in Jersey, Rufus? If you do, where have you been living?
In most cases we already pay UK VAT on many products – many retailers here refuse to remove it – they cite shipping costs. Some retailers charge VAT and GST – in effect we pay, again in some cases 25% on many essentials.
For example, one high-end food retailer here charges UK prices, GST and transport costs. The result is that we pay up to 17% MORE than the UK on fresh food.
Richard is correct… we have one of the highest costs of living anywhere in Europe – most people live pay cheque to pay cheque. We’re not all millionnaires here in Jersey, you know?
Our treasury minister in intent on taking more and more of our hard earned pounds in taxes to cover his blatent ineptitude. Couple this with aforementioned prices and sky-high rents and mortgages you will realise that there isn’t too much more to be taken. This means that people will not have spare money to spend and jobs will go… Ozouf is sucking us all into a high tax/high welfare state circle.
If GST goes up any further, then we will have big problems here – literally, people will not be able to afford to live here.
Andy
I do live in Jersey and I accept many of the issues that you raise.
It is nothing short of criminal that some retailers already pocket the UK’s VAT as extra profit margin. That practice should be outlawed immediately so that UK VAT and Jersey GST are not both paid. If that results in lower profits for the retailer, then that’s tough. They are getting a windfall profit at the moment through underhand methods and that’s not acceptable.
If you actually read what I said, something that Richard also overlooked, I said that it would enable many lower income earners to be taken out of the income tax net altogether. How you can imply that this would result in higher taxes escapes me. Those lower earners would be better off. The people who would be worse off would be those who spend more, i.e not the lower earners. They would be bearing the bigger tax burden. Are you saying that’s not fair?
Raising the rate of GST would also enable more items to be (correctly and fairly) exempted from it, again alleviating the overall tax burden for the lower earners.
Interesting that you advocate central price control
Bit socialist for Jersey isn’t it?
Rufus you are talking nonsense. Everything costs more here, rent, wages, shipping etc etc. Paul Davis Freight who specialise in shipping goods to the Channel Islands describe the Channel as the most expensive stretch of water in the British Isles.
If the shops are making massive profits from charging UK Vat inclusive prices and adding GST on why are there so many empty in town?
If it’s such a good earner, we have enough entreprenuers over here to jump on the band wagon don’t we?
Truth is more and more of us buy everything online, get a whacking 20% VAT off and in many cases delivered here for free. If it’s over the de minimus you pay the 5% GST.
If we do as you suggest and raise GST to 15% that will cripple middle Jersey even if you do think the poorer will be compensated with income tax proposals. As is always the case, the poor get tax breaks, the rich pay very little anyway and middle Jersey gets shafted.
There is no way on earth the average earner can afford to pay another 15% on goods purchased even if food is exempted.
Sorry David. It is you who is talking nonsense. I was recently in Jersey and many shops are in fact cheaper than UK, but many are not. Prime example is M&S. I saw a specific bottle of wine on a shelf at UK price, plus shipping, plus VAT.
Even in Northern Ireland and IOM where it still has to be shipped and rent, etc. paid they only charge UK price with no additional shipping charge.
David
Several points:
1. It is the shipping companies with their monopolies who cause that stretch of water to be so expensive. Has always been the case. The cost of importing and exporting goods is so vital to Jersey’s economy that this should be a government-controlled monopoly so that no commercial profit needs to be made from it. Prices of imported goods would drop instantly.
2. Expensive shop rents are derived from greedy landlords. Rent costs have to be absorbed by businesses and inevitably get passed on to the consumer. Either that or the business goes bust. Some form of rent controls are vital. Once shops have been left vacant for some time without relying on somebody’s personal lease guarantee (in which case the landlord doesn’t care if the shop is not let as he’s still getting his rent), the greedy landlord will soon drop his asking price.
3. Jersey would have to charge its own GST on all goods imported from off-island. Its not difficult. Imported goods can only come in by air or by sea through the airport or the harbour. If they don’t get released until the GST paid then it will soon get collected! There is massive leakage to the Jersey economy already by the failure to levy GST on imported goods. Such a policy would sit side-by-side with the abolition of Jersey companies “applying” UK VAT and pocketing it as super-profit. Those retailers would then be competing head to head with the internet even more than now, and they’d soon go out of business if their process aren’t competitive. Many of them are going out of business anyway because they can’t compete. That’s why its so imperative that Jersey collects GST (and at a higher rate) on all imported goods.
Lots of extra GST revenue for the States of Jersey and lower prices for consumers should enable “middle Jersey” to be somewhat better off than now with perhaps a lower income tax burden as well. The “rich” would pay more because all of their spending would be subject to a higher GST.
Incidentally, I only agree partially with your view that “middle Jersey” cannot afford such increases. It always amazes me what Jersey people view to be “vital spending” as opposed to luxury spending. The sheer number of people I know who moan about prices of food and essentials don’t seem to have much difficulty funding the second car, the second holiday abroad or the regular dining out or the trips to watch football in England. Try comparing that with the average person in the UK. Lots of Jersey people are simply not living in the real world, including most current politicians.
This was a government controlled monopoly once – I well remember British Rail running all the CI boats
British Rail was UK controlled, not Jersey controlled. I think their monopoly only extended to passenger ferries, not freight thiugh, and I think they pulled out in the middle 1970s.
Much later
Still at least a generation ago though. Long enough for a monopoly of rip-off freight costs to be exploited with a resultant high cost to all islanders, and in the process completely eliminating the possibilities for developing viable export industries.
“Expensive shop rents are derived from greedy landlords.” No , expensive shop rents are derived from community created land values. If the States collected all the land rent for public benefit, rather than allow the greedy landlords to take it as unearned income, their revenue problems would be fixed.
Richsrd
I don’t think its necessary to be a socialist in order to be against blatant racketeering!
Whatever means that are used by the Jersey “government” to raise fair taxes in the future must be equitable for ALL – the present system is clearly imbalanced.
So instead of pandering to a small, rich elite the government should address the problems associated with living on a small island import transport costs being a major consideration and develop an economy that is sustainable for a future which will definitely not involve supporting tax avoidance for corporations and wealthy individuals.
To reiterate Richard’s note: – Jersey is a wonderful island and the majority of people living there are responsible and hospitable; they deserve a far better deal from their “government”.
“Everything should be made as simple as possible – but no simpler.”- Albert Einstein
@ Zaphod, you sau many shops in Jersey are cheaper but only give an example of one that is more expensive. Please give examples of cheaper, I’ve lived here all my life and have yet to find one, in recent years anyway. The best I can find is stuff sold at UK price inclusive of UK VAT.
@Rufus, since when has eating out been a luxury, I just thought it was about qaulity of life. We could argue that only necesseties need to be reasonably priced and everything else is a luxury but how much fun would that be. Is a TV a luxury in your book? How about a car and the costs of running it after all we can all walk? How about a couple of drinks with friends in a pub, I suppose in your world that’s a luxury too.
But, back to necesseties, what do you think of the price of fresh vegetables, milk and bread in Jersey? According to a recent survey they are more expensive than London by some margin so how am I supposed to manage as well as do now when we add another 10% or so, ‘cos we can and we’ll still be fine?