States Minutes 18th January 2005

THE STATES assembled on Tuesday 18th January 2005, at 10.15 a.m. under the Presidency of the Bailiff ,

Sir Philip Bailhache .

All members were present with the exception of –

C e lia Joyce Scott   Warr en, Deputy of St.  Saviour–  ill.

Prayers

Tribute to the late Mr.  John Stephen Rothwell, former States member

The Bailiff paid tribute to the late Mr.  John Stephen Rothwell, former Senator of the States of Jersey. THE STATES observed one minute's silence as a mark of respect.

Asian tsunami disaster – acknowledgement

The Bailiff , on behalf of all members, acknowledged the destruction and human loss of life resulting from the Asian tsunami disaster.

THE STATES observed one minute's silence as a mark of respect for those who had perished in the disaster. Connétable of St.  Clement – re-election

The   Bailiff ,  on  behalf  of  all  members,  congratulated  Mr.  Derek  Frederick  Gray  on  his  re-election  as  the Connétable of St. Clement.

Service of Dedication – thanks

The Bailiff , on behalf of all members, thanked the Dean of Jersey and all those involved in the organisation of the Service of Dedication which had been held at the St.  Helier Parish Church prior to the meeting.

Subordinate legislation tabled

The following enactments were laid before the States, namely –

Royal Court Rules 2004. R&O 161/2004. Superior Number of the Royal Court.

Amendment (No.  29) to the Tariff of Harbour and Light Dues. R&O 162/2004. Harbours and Airport Committee.

Motor Vehicle Registration (General Provisions) (Amendment No.  13) (Jersey) R&O 163/2004. Order 2004.

Home Affairs Committee.

Road Racing (Karts) (No.  2) (Jersey) Order 2004. R&O 164/2004. Home Affairs Committee.

Social Security (Married Women) (Amendment No.  4) (Jersey) Order 2004. R&O 165/2004. Employment and Social Security Committee.

Road Traffic (Saint Clement) (Amendment No.  17) (Jersey) Order 2004. R&O 166/2004. Environment and Public Services Committee.

Matters presented

The following matters were presented to the States –

Jersey Council for Safety and Health at Work: report for the period 1st July 2003 to R.C.1/2005. 30th June 2004.

Presented by the Employment and Social Security Committee.

Planning applications: requirement to publicize (P.175/2004) – comments. P.175/2004. Presented by the Finance and Economics Committee. Com.(2)

Planning applications: requirement to publicize (P.175/2004) – comments. P.175/2004. Presented by the Connétable of St.  Martin. Com.(3)

Planning applications: requirement to publicize (P.175/2004) – comments. P.175/2004. Presented by the Health and Social Services Committee. Com.(4)

Jersey Airport: Fireground Remediation – Deed of Settlement (P.176/2004) – P.176/2004. comments. Com.(3) Presented by the Health and Social Services Committee.

Draft Public Finances (Jersey) Law 200- (P.180/2004): addendum to report. P.180/2004. Add. Presented by the Finance and Economics Committee.

A People's Advocate (P.202/2004): comments. P.202/2004. Presented by H.M. Attorney General. Com.

Senators and Deputies: terms of office (P.227/2004) – comments. P.227/2004. Presented by the Finance and Economics Committee. Com.

H.M. Prison, La  Moye: cell block, kitchen, electrical substation and fuel farm – P.2/2005. Com. approval of drawings (P.2/2005) – comments.

Presented by the Finance and Economics Committee.

The following matters were presented on 21st December 2004 –

International Conventions and Agreements: progress report for period 1st April R.C.54/2004. 2002 to 30th September 2004.

Presented by the Policy and Resources Committee.

Freedom of Information Law: position paper. R.C.55/2004. Presented by the Privileges and Procedures Committee.

Draft Public Finances (Jersey) Law 200- (P.180/2004): comments. P.180/2004.

Presented by the Policy and Resources Committee. Com. THE STATES ordered that the said reports be printed and distributed.

Matters noted – land transactions

THE STATES noted an Act of the Finance and Economics Committee dated 13th January 2005, showing that, in pursuance of Standing Orders relating to certain transactions in land, the Committee had approved –

(a )  as  recommended  by  the  Harbours  and  Airport  Committee,  the  lease  to  VLM  Limited  of  office

accommodation in Alares House, Jersey Airport, St.  Peter (known as Airport Letting B004H) for a period of three years, two months from 28th October 2004, at an initial annual rent of £2,640, to be reviewed on 31st December 2005, and 2006 in line with the Jersey Retail Price Index; and,

( b ) as recommended by the Environment and Public Services Committee, the entering into of a Deed of

Arrangement with Le  Clos Fauvic Limited for the exchange and counter-exchange of three areas of land in order to redefine the north-eastern boundary of the property formerly known as Fauvic Garage and to facilitate  the  widening  of  the  adjacent  public  footpath.  The  existing  north-eastern  boundary  was currently  defined  by  a  granite  wall  of  3  feet  in  x:  this  was  to  be  demolished  and  rebuilt  in accordance with Public Services Department drawing No.  002, dated 2nd August 2004, by Le  Clo Fauvic Limited which company would also undertake the preparation of the footpath to include the supply and fitting of all necessary curbing stones. The Committee was to resurface the pavement to include the supply, laying and rolling of macadam fillet at a total cost of £3,266.52. Accordingly, the public would acquire from the company (for a consideration of £1) an area of land totalling 7.57  square metres; Le  Clos Fauvic Limited would acquire from the public (for a consideration of£1) 2  areas of land totalling 2.65  square metres – as shown on the aforementioned drawing.

Matters lodged

The following matters were lodged "au Greffe" –

Draft Royal Court (Amendment No.  11) (Jersey) Law 200-. P.7/2005. Presented by the Legislation Committee.

Windfarm near Les Ecréhous. P.8/2005. Presented by the Policy and Resources Committee, and referred to the

Environment and Public Services Committee.

Draft Liquor (Restrictions on Consumption) (Jersey) Law 200-. P.9/2005. Presented by the Home Affairs Committee.

Broad Street, St.  Helier: proposed works. P.10/2005. Presented by Senator E.P.   Vibert , and referred to the Environment and Public

Services Committee.

The following matter was lodged on 21st December 2004 –

Jersey Police Complaints Authority: appointment of members. P.232/2004 Presented by the Home Affairs Committee.

The following matters were lodged on 4th January 2005 –

Draft Public Finances (Jersey) Law 200- (P.180/2004): second amendments. P.180/2004. Presented by Deputy S.C. Ferguson of St.  Brelade. Amd.(2) Referendum: Composition of the States Assembly. P.1/2005. Presented by Senator L. Norman.

H.M. Prison, La  Moye: cell block, kitchen, electrical substation and fuel farm – P.2/2005. approval of drawings.

Presented by the Home Affairs Committee.

Connétable s: voluntary re-election in 2005. P.3/2005. Presented by Senator M.E.   Vibert and referred to the Comité des Connétable s.

Shadow Scrutiny Panels and Shadow Public Accounts Committee:  appointment of P.4/2005. Shadow Chairmen and membership.

Presented by the Privileges and Procedures Committee.

The following matters were lodged on 11th January 2005 –

Draft Amendment (No.  28) of the Standing Orders of the States of Jersey. P.5/2005. Presented by Deputy G.P. Southern of St.  Helier, and referred to the Privileges

and Procedures Committee.

Housing Rent Subsidy Scheme: disregard to long-term incapacity allowance. P.6/2005. Presented by Deputy G.P. Southern of St.  Helier, and referred to the

Employment and Social Security and Housing Committees.

Château La Chaire, Rozel, St. Martin: use of public funds – P.22/2004 – withdrawn

THE STATES noted that, in accordance with Standing Order 22(3), the Deputy of St.  John had instructed the Greffier of the States to withdraw the proposition regarding Château La Chaire, Rozel, St.  Martin: use of public funds, (P.22/2004 lodged "au Greffe" on 3rd February 2004).

Housing Rent Subsidy Scheme: disregard to long-term incapacity benefit – P.207/2004 – withdrawn

THE STATES noted that, in accordance with Standing Order 22(3), Deputy Geoffrey Peter Southern of St.  Helier had instructed the Greffier of the States to withdraw the proposition regarding the Housing Rent Subsidy Scheme: disregard to long-term incapacity benefit, (P.207/2004 lodged "au Greffe" on 23rd November 2004), the Deputy having lodged a revised proposition on 11th January 2005.

Arrangement of public business for the present meeting

THE STATES confirmed that the following matters lodged "au Greffe" would be considered at the present meeting –

Draft Civil Evidence (Jersey) Law 2003 (Appointed Day) Act 200-. P.228/2004. Lodged: 14th December 2004.

Legislation Committee.

Jersey Brewery site, Belmont Place, St.  Helier: deletion of site warehouse (only) P.231/2004. from the list of sites protected for Category  A housing under Policy  H4 of the

Island Plan 2002.

Lodged: 15th December 2004.

Environment and Public Services Committee.

Shadow Scrutiny Panels and Shadow Public Accounts Committee:  appointment of P.4/2005. Shadow Chairmen and membership.

Lodged: 4th January 2004.

Privileges and Procedures Committee.

Arrangement of public business for the next meeting on 1st February 2005

THE STATES confirmed that the following matters lodged "au Greffe" would be considered at the next meeting on 1st February 2005, in the following order –

Draft Medicines (Amendment No.  2) (Jersey) Law 200-. P.214/2004. Lodged: 7th December 2004.

Health and Social Services Committee.

Senatorial Elections 2005. P.221/2005. Lodged: 7th December 2004.

Deputy P.N. Troy of St.  Brelade.

Connétable s: voluntary re-election in 2005. P.3/2005. Lodged: 4th January 2005.

Senator M.E.   Vibert

States Members' remuneration: register. P.225/2004. Lodged: 14th December 2004.

Privileges and Procedures Committee.

Draft  Housing  (General  Provisions)  (Amendment  No. 21)  (Jersey)  Regulations P.226/2004. 200-.

Lodged: 14th December 2004.

Housing Committee.

Senators and Deputies: terms of office. P.227/2004. Lodged: 14th December 2004.

Deputy A. Breckon of St.  Saviour.

Jersey Police Complaints Authority: appointment of members. P.232/2004. Lodged: 21st December 2004.

Home Affairs Committee.

Referendum: Composition of the States Assembly. P.1/2005. Lodged: 4th January 2005.

Senator L. Norman.

H.M. Prison, La  Moye: cell block, kitchen, electrical substation and fuel farm – P.2/2005. approval of drawings.

Lodged: 4th January 2005.

Home Affairs Committee.

H.M. Prison, La  Moye: cell block, kitchen, electrical substation and fuel farm – P.2/2005. Com. approval of drawings (P.2/2005) – comments.

Presented: 18th January 2005.

Finance and Economics Committee.

Draft Amendment (No.  28) of the Standing Orders of the States of Jersey. P.5/2005. Lodged: 11th January 2005.

Deputy G.P. Southern of St. Helier.

Windfarm near Les Ecréhous. P.8/2005. Lodged: 18th January 2005.

Policy and Resources Committee.

Mains drains services – question and answer (Tape No. 995)

The Deputy of St.  John tabled the following written question of Senator Philip Francis Cyril Ozouf , President of the Environment and Public Services Committee –

" A s the President has stated, during the 2004 Budget debate, that once the existing funding for mains drains is exhausted no additional mains drains extension can be put in place, would he inform members what action, if any, the Committee intends to take to obtain additional funds for this area of work, and what areas of the Island are still not served by mains drains?"

The President of the Environment and Public Services Committee tabled the following written answer –

" T he Environment and Public Services Committee's policy on the extension of the foul sewer network is to continue to extend the system to serve as many areas of the Island that remain unconnected to the network as can practicably and affordably be connected, subject to the availability of funds.

T he Committee originally requested £5.14 million for the 2005 sewers capital programme, but this was

reduced to £3 million as a result of the FSR process. This was confirmed by the States in the Resource Plan and in the Budget Debate.

W  hen considering how best to utilise the available funding, the Committee's first priority must be given to its

programme for the maintenance of the existing sewerage network. This entails the replacement or upgrading of various sections of the existing sewerage system to ensure that the structural condition and required hydraulic capacity within the system is maintained.

H aving identified the required funding for these high priority reconstruction schemes, any remaining

available funds will then be utilised for schemes to extend the foul sewers. The funding voted for the sewers programme in 2005 is sufficient to enable one major foul sewer extension scheme to be undertaken.

I n the period 2006 to 2009, early indications are that the funding for the sewers capital programme could be

further reduced to approximately £2 million per year. With this level of funding, virtually all of the available funds will be required for the reconstruction programme, and hence it is unlikely that any funds will be available to undertake sewer extension schemes in any of these years.

I n view of this, the Committee intends to press hard during the Capital Funding Review process later this

year, to gain agreement to increase the amount voted to the sewers programme, so that work on the sewer extension programme may continue, albeit, at a much slower pace than in the past.

I f this is unsuccessful, the Committee will consider alternative funding sources. Options could include an

annual sewerage charge or a supplement on water rates. It should be stated that in most countries, finance for their sewerage networks is provided not by taxation, but by some form of direct charge. Indeed, water and sewerage charges in the U.K. have risen this year because of the need for the Water Companies to invest in their networks. These challenges are not unique to Jersey.

A  s regards the areas of the Island still not served by mains drains, I would confirm that approximately 5,000

properties (14%) remain unconnected, these properties being predominantly in the rural areas throughout the Island.

T h e Committee believes that more properties should be connected, and the Committee is determined to put in

place a strategy to meet the short and long-term requirements for the disposal of sewage on the Island."

Progress on a legislation audit by the Environment and Public Services Committee – question and answer (Tape No. 995)

Deputy Gerard Clifford Lemmens Baudains of St.  Clement tabled the following written question of Senator Philip Francis Cyril Ozouf , President of the Environment and Public Services Committee –

" A s a result of the adoption of P.134/2004, (Regulatory Reform') of the Policy and Resources Committee by the States on 15th September 2004, all Committees are required to carry out audits of legislation which fall under their own administration. Would the President advise what progress the Committee has achieved to date in this regard, when he expects the work to be finalised and whether the Committee is working to a prioritised list? Should such a programme exist, would the President make it available to members?"

The President of the Environment and Public Services Committee tabled the following written answer –

" T he Committee will review all of the legislation under its control, in compliance with the States decision. Planning is the area within Environment and Public Services which has one of the highest administrative burdens. For this reason, a review of Planning regulations, which coincides with the introduction of the new Planning Law, will be the first Environment and Public Services area to be reviewed.

A  s a result of the transfer of administration of functions from the Economic Development Committee to the

Environment and Public Services Committee, there is a considerable amount of additional legislation that the Committee is now responsible for and it is not yet possible to put a timescale on when the full review and prioritisation process of former Agriculture and Fisheries legislation, will be complete. Suffice it to say it must be completed before December 2005.

 I would add that the Committee has already, and in addition, had plans in hand to review Agricultural

legislation in the early part of this year using the National Audit Office as external reviewers.

T  he Committee will work on reviewing all other legislation in close communication with the Policy and

Resources Department which is assisting all Committees in this important work.

I f the Deputy or any other States members has particular areas they believe should be a target for regulatory

reform within Environment and Public Services, the Committee would be grateful to receive suggestions and will work on those as the suggestions are made."

Human rights and equal opportunities – question and answer (Tape No.  995)

Deputy Geoffrey Peter Southern of St.  Helier tabled the following written question of Senator Frank Harris on Walker , President of the Policy and Resources Committee –

" I n the context of Strategic Aim 3.8, promotion of human rights and equal opportunities', contained in the Strategic Plan 2005 to 2010, will the President –

( a ) inform members of the extent to which Jersey is currently compliant with existing international Human

Rights obligations?

(b ) inform members whether the Committee has investigated how Jersey's Human Rights standards

compare with neighbouring territories?

( c ) inform members of what provisions, if any, the Committee has put in place to encourage the awareness,

education and promotion of Human Rights, and whether these provisions are adequately co-ordinated and resourced?

( d ) outline what measures, if any, the Committee intends to take to improve the provisions referred to in (c)

in relation to –

(i )  th e 60th Anniversary of the  Liberation of Jersey in 2005; and, (i i) in the 5-year period of the Strategic Plan?

( e ) state what action the Committee will take, if any, to encourage specific legislation to promote for the

elimination of all forms of discrimination in 2005? and,

( f )  state what action the Committee will take, if any, to encourage the promotion of legislation for equal

opportunities in employment matters?"

The President of the Policy and Resources Committee tabled the following written answer –

" ( a) The scope of Jersey's existing human rights obligations is considerable, including a large number of international conventions to which the Island is a party through the United Kingdom's ratification. These extend to issues such as the treatment of prisoners of war and civilians involved in armed conflict, the abolition of slavery, the elimination of racial discrimination, the prohibition or torture and cruel, inhuman and degrading treatment, the prevention of international child abduction, and the protection of children in inter-country adoption, to name just a few, as well as the European Convention on Human Rights.

 T h ese conventions are subject to review by the depository organisations and, together with the U.K. and

other Crown Dependencies, Jersey is required to report on its compliance. These reporting cycles are noted in the periodic report to the States on International Conventions and Agreements. The detailed recommendations of the review bodies are published and, as far as possible, legislation or other measures are put in place to ensure compliance with those recommendations.

T o th e extent that Jersey is signed up to these international conventions, every effort is made to ensure

the Island is fully compliant with its existing international obligations.

( b ) The focus of these questions, it is assumed, is on the European Convention on Human Rights and

Fundamental Freedoms which was ratified by the U.K. on behalf of the Island in 1953. The standards that apply to Jersey are therefore very similar to those that apply to all the neighbouring states that are also parties to the Convention, subject to their adoption of the various Protocols.

T h e P olicy and Resources Committee continues to monitor developments in human rights standards in

neighbouring territories.

( c ) With regard to the aims of the strategic plan 2005 – 2010, the Policy and Resources Department is

planning to implement a programme of human rights awareness, education and promotion across the whole of the public sector, in conjunction with the Human Rights (Jersey) Law 2000, coming into force. This will include a series of workshops, seminars and awareness-raising activities, co-ordinated though the Human Resources training department. Sufficient dedicated funding has been brought forward to implement this programme.

( d ) The promotion of human rights is an on-going objective for the whole of the public sector, throughout

the 5-year strategy and beyond. Whilst Policy and Resources has the lead, it must be the responsibility of every Committee and Department to deliver the results.

A l th o u gh the European Convention on Human Rights germinated from the seeds of Second World War

repression and the terrible abuses of that time, it has now moved on. We should all celebrate Jersey's 60th anniversary of freedom, but human rights are an issue for today rather than about a particular event in history, no matter how significant it is for Jersey.

( e ) The responsibility to promote legislation to eliminate all forms of discrimination has been assigned by

the States to the Legislation Committee. The Policy and Resources Committee has encouraged that Committee to bring forward its proposals, and will continue to do so in 2005.

(f ) The responsibility for legislation to promote equal opportunities in employment rests with the

Employment and Social Security Committee. The Policy and Resources Committee would generally welcome any positive developments in this regard."

Employment and Social Security benefits and the availability of the results of certain research studies – question and answer – (Tape No.  995)

Deputy Geoffrey Peter Southern of St.  Helier tabled the following written question of Senator Paul Francis Routier, President of the Employment and Social Security Committee –

" ( a) Will the President produce for members the figures I requested in question 2(a) of my written question asked on 7th December 2004, or if not, inform members when he will be able to do so?

( b ) Will the President, with reference to the answer to question  2(b) of my written questions asked on 7th

December 2004, indicate the Committee's method of applying Article  16(1)(c) of the relevant law in Long-term Incapacity Allowance in the case of a recovering drug addict?

(c ) In response to my supplementary oral question of 9th November 2004, the President stated that

information from the Nottingham study referred to in R.C.48/2004 would be available at the end of the year.

 ( i)  Would the President now distribute this information to members, or if not, inform members when he

will do so?

( i i) Further in his answer, the President referred to making available the OXERA work done on a

computer model'; would the President now also distribute this information to members, or if not, inform members when he will do so?"

The President of the Employment and Social Security Committee tabled the following written answer –

" ( a) Statistics for the fourth quarter ending 31st December 2004, have not yet been collated. They should be available in about 2 weeks' time. I would also remind the Deputy of the full answer to that question, that is, that one quarter's statistics is unlikely to give the full picture and that a post implementation audit of the new system will be conducted after one full calendar year of implementation.

( b ) The system would apply in the same way as it does to everyone else. All assessments are based on a

medical review which would take account of any relevant health condition and resulting loss of faculty.

( c )(i)and (ii)

T h e s t udy has yet to be completed. At the present time, I have been given no definite date for the final

report. This report will be published when available.

T h e m odel was constructed to help cost income support proposals and became available to the

Department just before Christmas. Any interested member is welcome to a demonstration and can contact the Department direct on telephone 280204."

Proposed new tax measures – questions and answers (Tape No. 995)

Deputy Geoffrey Peter Southern of St.  Helier tabled the following written questions of Senator Terence Augustine

Le  Sueur, President of the Finance and Economics Committee –

" 1 . Will the President –

 ( a )  c onfirm that the tax increases resulting from his 20% means 20%' proposals will take place over

the ranges indicated below for the examples given?

 ( b )  c omplete the table with the additional tax proposed for each salary point – ( i) i n absolute terms, and

(i i) a s a percentage of current tax paid?

S I N G  L E     N o children  No mortgage S ta r t £  25 , 0 0 0 to max £42,500

MARRIED  No children  No mortgage  Wife earning Start £48,000 to max £85,550

SINGLE PARENT  1 child  £120,000 Mortgage Start £38,800 to max £94,000

MARRIED  2 children  £120,000 mortgage  Wife earning

Start £59,500 to max £129,370

MARRIED  2 children  £200,000 mortgage  Wife earning Start £64,000 to max £146,000

2.  Will the President inform members whether any further progress has been made in the Committee's attempts to recover the tax lost from non-Jersey resident shareholders via a look-through' mechanism, and if not, will he –

( a) e xplain what additional measures the Committee proposes to put in place to raise the additional

£20  million required? and,

(b ) a ssure members that the Committee will not propose that the level of a Goods and Services Tax be

raised above the 5% currently indicated?"

The President of the Finance and Economics Committee tabled the following written answers –

" 1 . (a) I am afraid that I cannot give the Deputy the confirmation he seeks. The tax increases under the 20% means 20% proposals will also occur on incomes above the ranges given by the Deputy in his examples because there is no upper income limit for the tax increases under these proposals. In other words, those with high disposable incomes, currently paying tax at the standard rate of tax of 20%, will all have to pay additional tax and there is no upper income cut-off point when such people will not be paying additional tax under the 20% means 20% proposals. It is also very important to bear in mind that it is only those with the highest incomes in relation to their particular personal and individual circumstances that will pay any additional tax at all under these proposals. Indeed, it might be best to categorise such individuals as those with high net disposable income rather than as having high incomes. For example, it is difficult to argue that a single individual, with no children, no mortgage and no other commitments, earning £45,000 a year, does not have a high net disposable income. It is right and proper, in my view, that such an individual should pay an extra £1,200 a year in additional tax, phased in over 3  years, to help preserve our economic well- being and to safeguard Jersey's high standard of living for future generations. The additional tax that we are seeking to collect from such individuals will also ensure that, even after these tax

increases, they will still be considerably better off living in Jersey than many other places throughout the world,

and, as they grow old, will enable them to benefit from a system of benefits and pensions which is also considerably more generous than in other comparable jurisdictions. On the other hand, a married man with 2  children at school and a working wife, a £200,000 mortgage and paying contributions into an occupational pension scheme, could not be considered, on an income of £45,000, to have a high net disposable income, so he will not have to pay any additional tax at all under  the  20%  means  20%  proposals.  These  proposals  have,  unfortunately,  been  completely misunderstood by some people which is why the Committee decided to defer them at the time of last year's Budget; but I do hope that there is now some more understanding of these proposals as there is no wish, whatsoever, on my part or that of the Committee, to argue for and introduce tax proposals  which  perhaps  only  I  and the  Committee  understand  and  which  Members  of  this Assembly do not fully understand. To help Members and others get a fuller understanding of these proposals, the Committee will shortly make available a comprehensive and detailed schedule with many examples of different taxpayer types, detailing the impact, if any, on them under these 20% means 20% proposals. These examples will be available on both the gov.je and the Income Tax Office web-sites.

(b ) I attach tables with the information requested. I should advise the Assembly that the examples which

have been chosen by Deputy Southern are highly selective showing increases in tax liability for all of the household  types listed. This is  not, and  I repeat not, a  true representation of  how  all households will be affected by the proposals. I must emphasize that 70% of households in Jersey will not be affected by these proposals. In order to demonstrate this more clearly, I attach, as an annex, further examples of how households may be affected by the proposals, which give a more representative  picture.  As  I  have  already  said,  an  extensive  and  comprehensive  schedule  will shortly be made available on the States website.

SINGLE No children No mortgage

MARRIED No children No mortgage Wife earning

SINGLE PARENT 1child £120,000 Mortgage (interest rate 5.3%)

Salary £ Year £ Additional Tax from 2005 % increase from 2005 60,000 2006 1,290.67 15.88

2007 1,489.40 18.32

2008 1,489.40 18.32

94,000 2006 1,290.67 8.65 2007 2,581.33 17.29

2008 3,869.40 25.92 MARRIED  2 children  £120,000 mortgage (interest rate 5.3%)  Wife earning

MARRIED 2 children £200,000 mortgage (interest rate 5.3%) Wife earning

2 .  I assume that the question in part  (a) is referring to some form of withholding tax on non-finance sector,

non-resident shareholders rather than a look-through' mechanism. The look-through' arrangements are only intended to apply to Jersey resident shareholders.

( a) I can confirm that the Committee has indeed spent considerable effort in investigating whether a

selective tax could be implemented which would help restore a Jersey tax liability to Jersey for non- finance sector companies that are owned by non-resident shareholders. These companies will be subject to a zero corporate profit tax rate in Jersey. I wish to emphasise that most, if not all, of these companies will not be paying less tax in future; they will merely be paying the same amount of tax but in another jurisdiction rather than in Jersey. Any additional tax liability imposed on them will usually be an additional cost of doing business in Jersey.

In d e v e l oping any additional taxes that would apply to these companies, but would not impose additional costs on either Jersey owned companies or financial services companies, and which would

meet non-discrimination requirements, any new tax must be applicable to all companies. However, by making payment of this new tax off-settable against any Jersey corporate profits tax liability, and capping it at a maximum of 10% of profits, it would be possible to ensure that no additional tax

liability would fall to Jersey-owned companies, or financial services companies. It is also necessary to ensure that

non-trading Jersey companies which form the corporate vehicles for the customers of the international financial services provided in Jersey do not acquire a tax liability. If they did, Jersey would become uncompetitive in much of its main export market.

B  ro a d l y s peaking three possible options have been identified: a tax based on number of employees,

total cost of payroll, or on property occupied (some form of commercial rate). Whilst all 3 options are technically feasible in terms of implementation, they all suffer from undesirable economic consequences for the people of Jersey. To varying degrees they would be likely to lead to job losses, and increases in prices locally.

I n a d d it io n the technical complexity of all 3  taxes, which would have to be both capped and off-

settable, so as not to impact adversely on locally owned businesses, would, unfortunately make them relatively easy to avoid.

N o t o n ly that, but there is a possibility that the damage to the competitive environment may

disadvantage Jersey residents more than any additional tax revenue generated. Furthermore, it is estimated that the maximum level of tax revenue that could be raised from any one of the 3 options under consideration is in the order of £5 million to£6 million per annum.

I s h o u l d a dvise the Assembly that the figure of some £20 million to£25 million previously quoted is

misleading. Following further extensive research, the Committee is now advised that the reduction in tax revenues from non-finance sector, non-resident companies, as a result of the move to 0/10% is in the order of £10 million to £12 million, and not £20 million to £25 million. The reason for the revision to this estimate is that the original estimate included around £10 million to£12 million of tax revenues from a small number of specialist non-resident, non-finance companies, which will be leaving the Island before 2008 for reasons unconnected to the move to 0/10%. In the initial calculations this tax revenue was incorrectly included in the amount that would be lost as a result of 0/10%. In reality, whilst it will still be lost, it would be lost irrespective of the change.

F i n a l d e c isions on which of the three options, if indeed any, are in the best interests of the Island have

yet to be made.  However, the Committee will advise the Assembly of its views when it lodges its fiscal strategy proposals.

(b ) As for the possible introduction of a Goods and Services Tax (GST), I can assure Members that the

Committee is determined that the rate should be as low as possible, even if possible below a rate of 5%.

T h e C o m  mittee is also determined that not only should GST be introduced at a low rate, but also that

this rate should be guaranteed not to increase for a number of years.

H  o w e v e r , I would like to take this opportunity to make it clear that the reason we are making these

proposals is because, like it or not, the Island must balance its books; we must, as an Island, pay for the services we receive from the States. We are moving to 0/10% because this minimises the loss of tax from corporate profits, and maintains the economic foundation of the Island, i.e. the financial services sector. Without the financial services sector the loss of tax revenue would be much greater, and the economic activity on the Island to support our public services would be considerably smaller, implying much higher tax rates if States services were to be maintained.