Addendum to Draft Budget Statement 2014 (P.122/2013)

ADDENDUM

ADDENDUM  PAGE 3

PAGE 4   ADDENDUM

Addendum

At the conclusion of the States debate of the 2014 Draft Budget on 5 December 2013 the States had approved three amendments to the original proposition from the Minister for Treasury and Resources.

Amendments Agreed

Second Amendment (as proposed by the Constable of St. Helier ) – Part (iii)

The effect of part (iii) of the amendment is to decrease the estimate of income from taxation during 2014 by £100,000 by increasing the duty on fuel by the June 2013 RPI figure of 1.5% and not by the proposed 2%.

Part (i) of this amendment was subsequently amended by the Minister for Treasury and Resources. Part (ii) was not approved.

Second Amendment to the Second Amendment (as proposed by the Minister for Treasury and Resources)

This Second Amendment to the Second Amendment comes in three parts and amends Part (i) of the Constable of St Helier s amendment.

1. The effect of the firstpart is to decrease the estimate of income fromtaxation during 2014 by £103,000 by increasing the duty on wines by 3.6% and not by the proposed 5%.
2. The effect of the second part is to decrease the estimate of income fromtaxation during 2014 by £85,000 by increasing the duty on beers and ciders exceeding 2.8% abv but not exceeding 4.9% abv by 3% and not by the proposed 5%.
3. The effect of the third partdoes not vary the estimate of income fromtaxation during 2014 but introduces a new lower band of duty on beers and ciders exceeding 1.2% abv but not exceeding 2.8% abv, with this new band being calculated at 50% of the duty rate for beers in the 2.8% abv but not exceeding 4.9% abv band.

Fourth Amendment (paragraph (b)) (as proposed by Deputy Young)

The effect of this amendment is to decrease the estimate of income from taxation by £20,000 in 2015 by reducing the minimum donation (to charity) allowed under the provisions of Article 87B of the Income Tax (Jersey) Law, 1961 from £100 to £50 for Year of Assessment 2014. The States approved that the Draft Income Tax (Amendment No. 43) (Jersey) Law be amended in this respect.

Summary

The approved amendments to the 2014 Budget will reduce the estimates of total taxation revenue to £639,225,000 and the total States income to £673,183,000.

The balance on the Consolidated Fund at the end of 2014 is estimated to be £5,421,000

Note:

This Addendum includes updated tables as follows to reflect the above amendments:-

Page Number

Figure / Summary

of Draft Budget  Title Table

Statement

Figure 8 41 Duty Increases for 2014

Figure 13 44 Summary of duty revenues

Figure 14 44 Explaining the net variation to forecasts

Figure 15 48 Estimated financial implications of the 2014 Budget proposals compared with the MTFP Summary Table A 159 States income forecast for 2014

Summary Table F 164 Consolidated fund forecast for 2014

FIGURE 8 – DUTY INCREASES PROPOSED FOR 2014 (as amended)

Increase Proposed  (rounded to

Current Duty

Duty  the nearest

penny)

Litre of whisky at 40% £11.49 £12.76 127p (11%) Bottle of table wine £1.38 £1.43 5p (3%) Pint of beer 4.9% abv £0.33 £0.34 1p (3.6%) Pint of beer > 4.9% abv £0.51 £0.57 6p (11%) 20 King size cigarettes £4.29 £4.76 47p (11%) Litre of unleaded petrol £0.43 £0.44 1p (1.5%)

FIGURE 13 – SUMMARY OF DUTY REVENUES (as amended)

Budget 2014 Contribution MTFP  Budget 2013  to Budget

(July 2012)  (Dec 2012) (Dec 2013)  measures

(as amended) 2014

2013 2014 2013 2014 2014 2014

£ 000 £ 000 £ 000 £ 000 £ 000 £ 000

Imp ts on Spirits 4,157  4,133  4,161  4,137  4,747  610 Imp ts on Wine 7,248  7,504  7,256  7,512  7,626 114 Imp ts on Cider 1,039  1,107  1,040  1,108  919 (189) Imp ts on Beer 5,732  5,758  5,738  5,764  5,485 (279) Imp ts on Tobacco 12,392  11,813  14,004  13,425  14,789  1,364

Imp ts on Motor Fuel

21,221  21,537  21,135  21,451  20,263 (1,188) including Fuel Duty Rebate

Imp ts on Goods Imported 150  150  150  150  150

Vehicle Emissions Duty 1,000  1,000  1,050  1,050  924  (126) TOTAL IMP TS DUTY 52,939  53,002  54,534  54,597  54,903 306

Note: the 2013 Budget agreed increases to Imp ts duties for alcohol, tobacco and VED.

FIGURE 14 – EXPLAINING THE NET VARIATION TO FORECASTS (as amended)

Less: Original  Changes in

2014 Budget  Net variation MTFP  Volume

Proposals  to Forecasts Assumptions  assumptions

2014 2014 2014 2014

£ 000 £ 000

£ 000 £ 000

Imp ts on Spirits 470 (107) 247 610

Imp ts on Wine 265 (184) 33 114

Imp ts on Cider 54 (21) (222) (189) Imp ts on Beer 277 (131) (425) (279) Imp ts on Tobacco 1,466 (334) 232 1,364 Imp ts on Motor Fuel including Fuel Duty Rebate 299 (498) (989) (1,188) Vehicle Emissions Duty 44 0 (170) (126) TOTAL IMP TS DUTY 2,875 (1,275) (1,294) 306

The table shows the estimated net variation to forecasts after allowing for the duty assumptions in the MTFP for 2014 of 2.5% and the estimated effect of the changes in the assumption for the volume of each commodity imported since the MTFP and Budget 2013 assumptions in March and September 2012.

7.  Financial & Manpower Implications (as amended)

FIGURE 15 – ESTIMATED FINANCIAL IMPLICATIONS OF THE 2014 BUDGET PROPOSALS COMPARED

WITH THE MTFP (as amended)

Estimated 2014 Measure Taxation Revenue (£)

Goods and Services Tax Neutral Imp ts Duty

Alcohol duty increases 256,000 Tobacco duty increases 1,364,000 Fuel duty increases (1,188,000) VED duty increases (126,000) Sub Total 306,000

These figures represent the increased/decreased revenue compared to the 2014 MTFP forecast and not the total increase revenue that will be collected on these goods by the Customs and Immigration Service in 2014 compared to 2013.

Stamp Duty

Extend for a further 12 months the first time buyer relief in respect of property costing between

(300,000) £400,000 and £450,000

Sub Total (300,000) Total Financial Implications 2014 6,000

Estimated Impact on Measure 2015 Taxation Revenue (£)

Income Tax

Increase Income Tax exemption thresholds by 1.5%  2,900,000* Decrease in the Income Tax Marginal Rate from 27% to 26%  (7,800,000) Enhanced income tax exemption threshold for parents of children in higher education (900,000) Remove the restriction to child allowance by reference to the child s earned income  (420,000) Increase the age of entitlement for single, married persons and civil partners to the higher exemption threshold 750,000 Decrease in the minimum donation to charity from £100 to £50 for Year of Assesment 2014 (20,000) Sub Total (5,490,000)

The income tax measures relate to the income tax year of assessment 2014. These will impact on the tax revenues to the States in 2015. However, most current year basis taxpayers under ITIS will see the benefit of these measures during 2014. This is because the measures will impact on the calculation of their provisional ITIS effective rate.

* Note: this is an updated figure after allowing for the most recent tax data (YOA 2011).

Manpower Implications

The proposals within the Budget Statement 2014 will be implemented without any increase to current approved staffing levels.

23.  Summary Table A – States Income 2014 (as amended)

Budget 2014 MTFP Budget 2013

Outturn (Dec 2013)

(July 2012) (Dec 2012)

(as amended)

2012 2013 2014 2013 2014 2014

£ 000 £ 000 £ 000 £ 000 £ 000 £ 000

Income Tax

Personal Income Tax 351,121  377,000 394,000 377,000  394,000 394,000 Companies 79,339  77,000 80,000 79,965 82,965 82,965 Provision for Bad Debt (4,000) (4,000) (2,000) (2,000) (2,000)

 430,460  450,000  470,000  454,965  474,965  474,965

Original Budget Measures 7,600  7,600

Goods and Services Tax (GST) 79,559  79,761  81,955  79,761  81,955  81,955

Imp ts Duties

Imp ts Duties Spirits 4,091  4,157  4,133  4,161  4,137  4,747 Imp ts Duties Wine 6,783  7,248  7,504  7,256  7,512  7,626 Imp ts Duties Cider 927  1,039  1,107  1,040  1,108  829 Imp ts Duties Beer 5,047  5,732  5,758  5,738  5,764  5,575 Imp ts Duties Tobacco 15,825  12,392  11,813  14,004  13,425  14,789 Imp ts Duties Fuel 20,396  21,221  21,537  21,135  21,451  20,263 Imp ts Duties Goods (Customs) 328  150  150  150  150  150 Vehicle Emissions Duty (VED) 839  1,000  1,000  1,050  1,050  924

 54,236  52,939  53,002  54,534  54,597  54,903

Stamp Duty

Stamp Duty 15,404  20,478  23,427  20,478  23,427  23,127 Probate 4,069  2,500  2,500  2,500  2,500  2,500 Stamp Duty on Share Transfer (LTT) 1,699  1,551  1,775  1,551  1,775  1,775  21,172  24,529  27,702  24,529  27,702  27,402

Total Taxation Revenue 585,427  614,829  640,259  613,789  639,219  639,225

Other States Income

Net Investment Income 4,166  3,721  3,679  3,721  3,679  3,679 Dividends and Returns 18,442  8,319  11,186  8,319  11,186  11,186 Jersey Financial Services Commission Fees 3,685  3,700  3,700  3,700  3,700  3,700 Returns from States Trading Operations 1,671  1,691  1,731  1,691  1,731  1,731 EUSD Retention Tax 1,464  1,500  -  1,500  -  - Income Tax Penalties 1,035  1,071  1,071  1,071  1,071  1,071 Fines and Other Income 463  543  559  543  559  559

 30,926  20,545  21,926  20,545  21,926  21,926

Island Rate Income from Parishes 11,380  11,670  12,032  11,670  12,032  12,032 Total States Income 627,733  647,044  674,217  646,004  673,177  673,183

1. The Statesdecisionnot to approvetheincreasesinImptsdutyonfuelwaspartlyoffset by additionalincreasesontobaccoresultingin a reductionof £1.04 millionintheMTFPStatesincometargetsfollowingthe 2013 Budget
2. The impactofthe 2014 Budgetproposals,asamended,amounts to £6,000in 2014 withtheIncome Tax proposalsinrespect ofyearofassessment 2014 notaffectingtheStatesaccountsuntil 2015.

28.  Summary Table F – Consolidated Fund Forecast for 2014 (as amended)

Revised Forecast Actual MTFP Budget 2013

for 2014 Budget

Consolidated Fund

2012 2013 2014 2013 2014 2013 2014

£ 000 £ 000 £ 000 £ 000 £ 000 £ 000 £ 000

47,176 Opening Balance 32,738 19,717 32,738 18,677 31,160 12,099

Proposed Capital Expenditure Allocation - (27,100)

Housing Schemes

Other Fund Adjustments - Return of Housing

27,000 27,000 27,000 Capital

Other Fund Adjustments - Allocation to Capital

(26,472) (26,472) (26,472) Programme

20,000 Repayment of JT Preference Dividends (4,743) (4,743) (4,743)

Other Fund Adjustments - Allocation to Capital

(8,500) (8,500) (8,500) Programme

Other Fund Adjustments - Allocation to

(5,000)

Innovation Fund

Other Fund Adjustment - Earmarked Carry

7,000 (7,000) (7,000) (7,000)

Forward from 2012 to Fund Capital

Other Fund Adjustment - Earmarked Carry

3,300 (3,300) 3,300 (3,300) 3,300 (3,300) Forward from 2013 to Fund Capital

Other Fund Adjustment - Jersey Post Special

(1,528) (698) (1,528) (698) (1,528) (698) Dividend 2012 to Fund Capital

Other Fund Adjustment - Apply Strategic

Reserve contribution to Future Hospital project  (10,200) (Phase 1)

Other Fund Adjustment - Apply Currency Fund

(3,000) contribution to Liquid Waste Strategy (Phase 1)

(27,088) Other Fund Adjustments

Proposed transfer from Strategic Reserve 10,200 Transfer from Currency Fund 3,000

11,172 Forecast Surplus/(Deficit) for the year 707 59 (333) (981) (333) (981)

Budget measures 2014 Budget

Increases in Imp ts duties as amended 306 Extension of FTB stamp duty relief (300)

Proposed variations to the Capital Programme

2014 requiring a reduced contribution from the  2,510 Consolidated Fund in 2014

Estimated Consolidated Fund Balance

31,160 Central scenario 19,717 11,563 18,677 9,483 12,099 5,421

1. The Statesdecisionnot to approvetheincreasesinImptsdutyonfuelwaspartlyoffset by additionalincreasesontobaccoresultingin a reductionof £1.04 millionintheMTFPStatesincometargetsfollowingthe 2013 Budget.
2. Following theproductionofthe 2012 FinancialAccountsthebalanceontheConsolidated Fund atthebeginningof 2013 hadreducedslightlyandisforecast to reduce to £12 million by theendof 2013. Thisislargelydue to theallocation to theInnovation Fund beingmadein 2013 whenoriginallyforecastfor 2012.
3. The impactofthe 2014 Budgetproposals,asamended,amounts to £6,000in 2014 withtheIncome Tax proposalsinrespectofyearofassessment 2014 notaffectingtheStatesaccountsuntil 2015.