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STATES OF JERSEY
EXPENDITURE PROPOSALS FOR 2012 AND 2013 AND DRAFT BUDGET STATEMENT 2011 (P.157/2010) – THIRD AMENDMENT (P.157/2010 Amd.(3)) – COMMENTS
Presented to the States on 6th December 2010 by the Council of Ministers
STATES GREFFE
2010 Price code: A P.157 Amd.(3)Com.(2)
COMMENTS
The majority of the Council of Ministers supports the arguments set out in the comments presented by the Minister for Treasury and Resources.
Accepting amendment 3 would reduce States income and increase the deficit each year. The table below shows the net financial impacts depending on the rate of GST that applies –
2011 2012 2013 (7 months) (year) (year)
£m £m £m GST at 3% 2.7 4.6 4.6 GST at 4% 3.7 6.3 6.3 GST at 5% 4.6 7.9 7.9
Summary
A summary of the arguments that the Council of Ministers supports are as follows –
- GST exemptions would be an inefficient way to support those on lower incomes, since those on higher incomes actually receive more in cash terms from such a policy.
- There would be substantial administrative costs if this proposition is adopted.
- The complexities involved with zero-rating food and domestic energy will increase both the cost of compliance for those businesses involved and the cost of administration for the Taxes Office.
- These exclusions will also reduce the voluntary compliance rates by businesses, which so far have been very high at around 92%.
- A broad-based consumption tax like the current GST system has a number of economic advantages over a system with exemptions.
- There is a real risk in Jersey that some or all of the reduction in GST on food and/or domestic energy would not be passed on through lower prices.
The Council of Ministers is concerned about the impact of GST on the less well-off. They fully support the Budget proposals which, if approved, will protect the less well- off from the impact of proposed increase in the rate of GST.
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