Letter Published in Jersey Evening Post on 8
Mollington, Plat Douet
financial forecast in
the Business Plan 2007-11 shows that without zero/ten and GST there
would be a
continuation of deficits until 2009, and still no surplus for transfers
Strategic Reserve since 2011.
Even the expectation
even in 2010 very likely ignores the further big rise in energy food,
commodity, transport costs and interest rates expected to worsen for
ahead. Income tax is forecast to increase by 3% pa cumulative. So no
to the finance industry because of international competition is
all. Which brings us to zero/ten and GST originally supposed to
the £80-100 million black hole, but already needed to
cover rising expenditure.
But we are told that the worrying shortfall predicted in 2010 and 2011
happen, partly down to extremely conservative projections of loss by
finance industry to competition.
Quite so. The promised
massive loss of business to international tax competition has not
What business we lost was mainly due to determined UK Inland Revenue
avoidance measures. For all the positive reasons given in the 2002
report, the finance industry continues to expand, business last year
£1 billion, to yield over £200m tax.
The very notion that this
booming industry confident in its future prospects needs a £70m
one-third of tax yield, is ridiculous. Quite clearly from the Business
cannot possibly afford it anyway.
Not only that, zero/ten
does not even begin to comply with the EU Code of Conduct on Business
We are indebted to Darius Pearce's submission on the scrutiny zero/ten
for the actual wording of the code, never publicised by government over
past four years.
Briefly the code defines
'harmful' tax measures as tax rates significantly lower, including zero
taxation, than those which generally apply in the EU states and, as we
undertaken to abide by the code, our acceptable 20% rate must apply
Sub-sections apply to our
IBC companies, which are being phased out, and exempt companies, which
elsewhere. The next paragraph, reducing the finance sector rate from
20% to 10%,
contravenes the 'standstill' commitment.
The five-year compliance
deadline is 3 June 2008. As zero/ten disobeys and frustrates the basic
intention of the code is it likely that the European Council of Finance
(ECOFIN) meeting at that time will agree to -a zero-rate tax haven on
Moving on to- continuing deficits, Oxera warned
four years ago of the imbalance and unsustainability between States
rising expenditure, of which staff salaries is still around the 60%
Since then the focus has been on increasing taxation to cover deficits
millions of pounds wasted. Just two recent examples: £250,000
promised for the
Jersey Race Club grandstand (surely enough rich people there for a bond
and the appalling £170,000 for a Jersey logo. As mentioned above,
zero/ten and GST we will have a small surplus from 2010, hopefully.
No zero/ten should
automatically mean no GST, but how to avoid deficits in the meantime?
simple. Create immediate budget surpluses by introducing long-overdue
PAYE in 2008, with 2007 tax payable over five years with a 57%
for early payments based on an annual December deadline. The discount
amount to a welcome tax-free benefit and so we can expect substantial
the early years.
The current half-baked IT
taxpayers with the worry of always being one year in arrears, and no
Income Tax Department would arrange further extended payments for those
Last November the Finance Minister said that he was considering
normal PAYE within a year or two, but this would be impossible with the
burden of GST in place.
We must not ignore
conditions in the world around us. As I said in my submissions to the
Services Scrutiny Panel (on the scrutiny Strategic Plan website), there
been repeated Bank of England warnings on the unsustainability of the
trillion UK mortgage and consumer debt and recent warnings of higher
Bearing in mind that huge borrowings to fund trade and federal
deficits has the US dollar in deep trouble, and that the Middle East
will be a
tinderbox for years, this is most certainly not the time for Jersey to
on risky and quite unnecessary tax changes.
We can only hope that in
the light of changed circumstances here and the grave political and
uncertainty elsewhere that enough States Members will realise that both
and GST are now out of the question.