Control of Housing and Work: Consultation Findings Report and draft Fees Order.

STATES OF JERSEY

CONTROL OF HOUSING AND WORK: CONSULTATION FINDINGS REPORT AND DRAFT FEES ORDER

Presented to the States on 23rd April 2013 by the Chief Minister

STATES GREFFE

2013   Price code: C  R.35

Chief Minister's Department Population Office

Consultation Findings Report

F ees to be presented under the new

C  ontrol of Housing and Work (Jersey) Law 2012

Foreword of the Migration Advisory Group

The Control of Housing and Work Law has been designed to significantly improve the Island's controls over population while also reducing "red tape" for businesses and Islanders.

As part of these changes, we have proposed that fees be introduced such that the cost of controlling immigration does not fall on the taxpayer as a whole.

Having considered the findings of our consultation, fees will be paid:

• by new migrants themselves on first arriving in the Island
• by way of an annual fee on businesses who employ migrants, and
• on visiting contractors and traders.

In making these decisions, it should not be forgotten that migrants have for many centuries brought great value to our Island. Indeed, where immigration creates jobs for local people and brings high levels of economic or social benefit, it is welcomed, while also recognising that we are a small Island.

It will be for the States Assembly to decide the Island's population policy. The Control of Housing and Work Law will be used to achieve whatever policy is agreed, and the fees proposed in this Paper will fund its operation.

The fees proposed are considered moderate and balanced. They are also consistent with those levied in Guernsey and the Isle of Man.

At the same time as introducing these fees, the new Law will also cut "red tape" for businesses and Islanders, and make it easier to interact with government. For example, by removing the need for businesses to make an application when wanting to employ more local people, by introducing registration cards to ensure every new employee's residential status is clear, and by abolishing the need for long-established residents to apply for housing consent when purchasing or leasing property.

Guidance materials on the new Law, which is scheduled for introduction on 1st July 2013, are available at www.gov.je/registerationcards .

The Migration Advisory Group

Assistant Chief Minister, Senator P.F. Routier, M.B.E., Chairman Minister for Housing, Deputy A.K.F. Green of St. Helier , M.B.E. Minister for Economic Development, Senator A.J.H. Maclean Assistant Minister for Social Security, Deputy S.J. Pinel of St. Clement

Having  considered  the  responses,  the  following  fees  to  cover  the  costs  of administering these controls are planned:

These fees will be reviewed in subsequent years. In doing this, it is recognised that stability and certainty in fee structures over the medium term is desirable, in particular, for employment costs.

By way of comparison with Guernsey and the Isle of Man:

• Guernsey: £88 for a short-term licence of 9 months; £106 per year for a 3 year licence, and £132 per year for a long-term licence for an essential worker.
• Isle  of  Man:  £50  for  a  work  permit  application  and  £50  for  an extension.

GLOSSARY:

The new Law will introduce a variety of new categories:

Overview of the Consultation

23 responses were received to the consultation of fees:

The  responses  from  individual  Islanders  were  overwhelmingly  in  support  of introducing fees, and that those fees should be much higher than those suggested in the consultation:

"We believe that the user should pay in every case for all costs in relation to immigration"

"I believe the ideas outlined are excellent"

"I think it's a great idea that should have been put into practice a long time ago"

"Introducing a charge to immigrants is an excellent idea".

Example Individual Respondents

However, businesses and their representative organisations raised firm concerns about  the  impact  on  costs  and  competitiveness  for  businesses  which  rely  on migrant labour:

[We] generally agree with the principle of "user pays", although it is...yet another cost of doing business in the Island'.

Fiscal Strategy Group of Jersey Finance

"We agree with the process of encouraging Entitled Workers..." "[F]eeswill dilute the appeal of Jersey as an employment destination"

"There  could  be  a  wage  spiral  as  local  people  try  and  negotiate  their worth"

Jersey Hospitality Association

"[We] understand the objectivesbut [are] concerned if a greater burden is placed on businesses"

"These  additional  costs  will  either  have  to  be  passed  onto  consumers; therefore, they are inflationary, or absorbed by the business, thus reducing profit."

"[W]e would view the measure as a new fee or tax. New fees/taxes cannot be said to improve the Islands' competitive position."

"[We] should express the fear that this measure is just an opening feewith the possibility that such fees would be increased in future".

The Jersey Chamber of Commerce

1.  Registration Cards

1.1  Respondents' Comments

The greatest number of responses came from individuals who felt that a registration fee was a good idea. However, a number of respondents also argued that the proposed £75 fee was insufficient.

"If the intention is to reduce immigration I believe introducing the proposed fees would have little impact"

"If charging is the deterrent I think the higher the charges for immigrants the better"

"I think your £75 fee and other fees being considered are far too low to even possibly make people reconsider their decision to move to Jersey. I think all your proposed fees need to be doubled at the very least."

"The £75tariff is ridiculous. You just need to stop more people coming to Jersey"

"£75 in addition to a coach/boat fare is not too much"

"[T]his principal of introducing a fee is flawedall of society benefits [from immigration]".

Individual Respondents

Respondents from the hotel and more generally the tourism industry were, however, of the opinion that sectors reliant on a migrant workforce would be disproportionately affected by the levying of registration fees.

"The tourism industry and its components of hospitality, travel and leisure is being unfairly penalised"

"Seasonal Workers are already disadvantaged – Seasonal Workers already pay ITIS and Social Security from the outset, however have they have no recourse to benefits"

Jersey Hospitality Association

They foresee businesses themselves bearing the costs, particularly in their attempt to attract quality workers – many being young and without the money to afford the initial financial outlay – in a competitive international market.

"Newcomers often lack funds and are unlikely to have the £75 required".

Seymour Hotels

Some respondents also felt that new migrants are already disadvantaged, and that fees would  unfairly  target  immigrant  populations  whose  manpower  is  essential  for  a prosperous economy.

"Newcomers to the Island are already disadvantaged, although paying Social Security and ITIS, they have no recourse to health treatments or benefits for at least  6 months.  The  £75  fee  should  at  least  cover  accident  medical emergencies insurance."

Seymour Hotels

Conclusions of the Migration Advisory Group

1. Registration Cards issued to High Net Worth Migrants

High Net Worth Individuals obtaining permission to purchase or lease property are already required to pay a minimum income tax contribution of £125,000 per year. These individuals, therefore, contribute significantly to our Island.

A fee of £5,000 will be payable on completion of a successful application. It is not believed  that  this  fee  will  prevent  Jersey  from  continuing  to  attract  these  new residents, while also being sufficient to cover the due diligence work undertaken. In 2012, 12 x 1(1)(k) applications were approved.

2. Registration Cards issued to Registered and Licensed Persons

A number of respondents, notably organisations that represent businesses, pointed out that migrant labour continues to be important to their business, and for the economy. This is accepted and appreciated. At the same time, a sizeable number of individual respondents  felt  the  fee  should  be  much  higher  in  the  interests  of  deterring immigration and supporting local employment.

A fee of £75 was initially proposed in the consultation and is maintained as a proposal. This fee will be levied against Registered and Licensed persons when they arrive in Jersey and obtain their first registration card.

This is not considered excessive, and when weighed up against the cost of moving to Jersey, seems relatively modest. Furthermore, local unemployed has continued to rise and their employment must be prioritised – this is why there is no cost proposed for Entitled or Entitled for Work persons.

Reduced Fee and Exemptions from Fee:

1. A reduced fee of £35 will be applied where a person who was resident in the Island when the Law was first introduced obtains their first registration card (all residents need a registration card when they first change job or purchase or lease property  after  the  new  Law  is introduced,  and  those  who  are  Registered  or Licensed at this point will have a £35 fee levied).
2. It is also proposed that people in full-time education below the age of 21, where a parent is Entitled or Licensed, should not have to pay for their Registration Card. The purpose of this isto avoid students having to pay £75 for a Registration Card, recognising that it is understandable that they would want to live in the Island with their Entitled or Licensed parents, while still at school or during holidays. On a practical level, this means that people who have yet to obtain their qualifications can  be  issued  a  Registered  Card  without  a  delay  while  they  obtain  their qualifications and without uncertainty over whether a fee is due.
3. It is also important to note that the fee will be levied when a migrant first arrives and registers for a registration card, and so isnot a recurring cost, which means they can return to the Island without having to pay for another card.

It must finally be stressed that, while many respondents wanted the fee to be much higher to deter immigration, the objective of the fee is to recover costs, and it is the business  licence  issued  to  each  business  that  will  limit  their  ability  to  employ Registered and Licensed employees, not the fee itself.

2. Licensed Employees

1. Respondents' Comments

Respondents were receptive towards the introduction of a fee levied against Licensed individuals. Although representatives of the business community who responded saw this as another cost to be incurred by businesses, they were not strongly in opposition to the proposition.

FSG generally agree with the principle of "user pays", although it is noted that having to pay a fee for "Licensed" employees represents yet another cost of doing business in the Island'.

Fiscal Strategy Group of Jersey Finance

Several  respondents  advocated  levying  a  higher  fee,  reasoning  that  Licensed individuals'  higher  wages,  particularly  in  comparison  to  Registered  individuals' wages, warranted this.

"Companies  employing  J Cat  staff  will  barely  notice  your  annual  charge unless you make them a realistic amount".

Individual Respondent

Nevertheless,  it  was  feared  that  any  fee  levied  against  Licensed  or  Registered individuals will give the impression Jersey is "closed for business".

"The proposal for immigrants' paying to work is the wrong signal' as it is felt this gives off the impression that Jersey is closed for business".

Individual Respondent

"The application of levying fees via immigration control will dilute the appeal of Jersey as an employment destination".

Jersey Hospitality Association

2. Conclusions of the Migration Advisory Group

While some respondents questioned whether the fee for these employees should be more than £200, since on average they tend to earn higher salaries, others felt that the fees should be smaller, given the important contribution these employees already make in creating local employment. It was also suggested by respondents that it would be more efficient to levy a one-off fee when the employee first arrived in Jersey. However, very few respondents commented on the proposals.

It  is  recognised  that  it  is  important  that  the  Island  remain  attractive  to  inward investment and high value migrants where these positions safeguard and create local employment, and that some reduction of the £200 would be beneficial, alongside a fee for Registered Employees (see Section 3 below). It is therefore proposed that the annual fee be £175 per Licensed employee permitted. Not-for-profit undertakings would not pay this fee, including the States of Jersey not having to pay itself.

This fee would first be payable by 31st January 2014, in respect of the maximum number of Licensed employees permitted as at 1st December 2013, irrespective of whether those posts are filled, or how long they have been filled for. An online payment facility is planned. This is considered an efficient collection mechanism and generates an even revenue stream.

Analysis of Income expected to be generated:

3. Registered Employees

As part of the consultation, annual fees on businesses in respect of the number of Registered employees they were permitted was not proposed. However, it was noted in the Consultation Paper that the idea had merits, while recognizing concerns over the impact on businesses.

Since  the  consultation,  unemployment  in  Jersey  has  continued  to  rise,  and  the Strategic Plan and Economic Growth Strategy have both been clear in outlining that the Island should tackle local unemployment and target high value immigration that creates  and  safeguards  local  employment.  With  this  in  mind,  the  question  of introducing annual charges in respect of Registered migrants has been re-considered as being consistent in line with economic and strategic objectives.

Indeed, the consultation responses outlined both a concern on the part of businesses and  a  desire  on  the  part  of  Islanders  to  introduce  and  increase  fees  for  migrant employees, as noted in the "overview of the consultation" section above.

An  annual  charge  of  £50  per  Registered  employee  permitted  is  proposed.  This represents a very small proportion of total employment costs. Not-for-profit activities would not pay this fee. This fee would raise £250,000 per annum, although this will vary subject to the licensing decisions of government and employers.

This fee would first be payable by 31st January 2014, in respect of the maximum number  of  permanent  Registered  employees  permitted  as  at  1st  December  2013, irrespective of whether those posts are filled, or how long they have been filled for. It will  be  collected  using  the  same  collection  mechanism  proposed  for  Licensed employees.

4. Non-Resident Undertakings

1. Respondents' Comments

The majority of respondents to this particular section of the consultation were from the construction industry. Most were in principle in favour of revising current legislation and implementing measures to safeguard the local industry.

"[W]e concur that the existing [legislation] requires revision in order to modernise and streamline.".

Dandara

Nevertheless,  respondents  were  wary  that  the  proposed  fees  could  become  an additional cost to be absorbed by the Jersey contractor who should not be penalised for bringing specialist contractors to the Island.

"[The  Jersey contractor] should  not  be  penalised  financially  because  the limited resources of the Island cannot service [their] particular need".

Dandara

However, the primary concern related to the proposed manner in which the fees will be calculated and how practical it will be to enforce this Law. One problem area, for example, will be how the length of a contract will be calculated by applicants as there may be a tendency towards conservative estimation.

"If  we  are  now  to  be  chargedwe  would  be  more  conservative  in  our estimates.".

Premier Contracting & Shopfitting

"The proposed enforcement of the non-resident contractor fee would present difficulties,  both  in  terms  of  its  administration  and  enforcement  of collection.".

Fiscal Strategy Group of Jersey Finance

The  manner  in  which contract extensions  would  be  dealt  with  was  also  queried, particularly when this is the result of unforeseen circumstances that has prevented the non-resident contractor working e.g. bad weather.

"There would be a potential for a locally based contractor to delay works on site  causing  an  increase  in  cost  for  the  off-Island  contractor  through increased fees".

Dandara

Some alternative suggestions were forwarded including the imposition of a flat fee or a fee based on a percentage of the labour costs to be charged.

2. Conclusions of the Migration Advisory Group

While there was general comment that fees on non-resident undertakings would be complex and difficult to administer, this was appreciated at the consultation stage and was not felt a considerable barrier as it was felt important that the fee should relate to the size of the contract.

However, respondents have emphasized various objections, including the fact that workforce requirements and timings vary over the course of a contract, and this could make  calculating  a  fee  very  challenging,  especially  where  contract  lengths  were varied. A fee relative to profit or revenues was also considered, but this would be more complex and burdensome to administer and enforce.

Therefore, in response to the consultation, and to keep matters straightforward for all parties while levying a contribution to the Island, it is proposed that all non-resident undertakings pay a flat fee of £500 if in the Island to undertake work for 90 days or less, rising to £1,500 for contracts of more than 90 days.

This will be policed by monitoring arrivals at the Harbour, and monitoring sites where visiting  contactors  are  engaged  and  using  the  powers  under  the  new  Law  to immediately require all activities to cease in the event that the fee is due and has not been paid.

Modest exemptions to the fee will be created whereby:

• A non-resident undertaking in the construction industry who works in the Island for 5 days or less in any 12 month period will not pay a fee, and nor would a non-resident undertaking in any  other sector for 30 days or less in any 12 month period (rising to 60 days for medical purposes).

While some respondents wanted a much higher fee, it is not considered in the best interests of the Island to significantly increase the costs of construction, and it seems sensible to start with a relatively modest fee that could be increased, rather than immediately introduce a more significant fee that could have implications for the costs of construction. Changes could also be appropriate after monitoring the fee and any impacts.

In the meantime, this fee will create a modest, if important, incentive to choose local undertaking, while ensuring that undertakings who visit the Island and pay no tax or social security make a contribution by way of a fee. Of course, the fee can be avoided by contracting a local business to undertake work if this is possible.

Analysis of Income generated:

5. Non-Resident Hawkers and Traders

1. Respondents' Comments

There  was  general  consensus  amongst  the  responses  received  that  the  proposed £250 fee to be levied against non-resident hawkers and traders was insufficient.

However, respondents' concerns were largely motivated by the perceived deleterious effects that larger businesses who frequently visit the Island have on local trade, rather than the occasional visits of small independent traders.

It was felt that because non-resident traders and hawkers do not directly contribute to the Island, a higher fee was justified, especially in light of the potential profit non- resident businesses can make on the Island.

"The fees must be between £1500 and £2000. Remember that they do not pay social security, rates, rents nor GSTA fee of £250 is laughablethese are not craft people generating a few hundred pounds"

[A] nominal fee of £250...will not be making us the money we would receive in tax".

Individual Respondents

2. Conclusions of the Migration Advisory Group

There was very little comment around this proposal, but those that did comment felt the fee should be much higher. Appreciating that Islanders can generally purchase goods locally, or on-line, and that a direct financial contribution from visiting traders was welcome and appropriate, it was agreed that this fee could and should be higher.

Therefore, it is proposed that a flat fee of £1,000 be payable for each visit by a non- resident trader.[1]

• Not-for-profit organisations will be exempt from this fee.
• Where the trader is part of an event or conference, such as at Fort Regent, this fee would be payable in relation to the whole event and not by each individual trader, i.e. a fee of £1,000 for the event.
• A  provision  would  also  allow the  Minister  discretionary  powers to  allow dispensations for events that are culturally beneficial to the Island.

APPENDIX

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