Examples of total tax cuts in 2007 2008 and 2009 resulting from increases in exemption limits

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WRITTEN QUESTION TO THE MINISTER FOR TREASURY AND RESOURCES BY DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY 1st JULY 2008

Question

1. O n 3rd June 2008 the Minister gave examples of total tax cuts, in monetaryterms, over the threeyears 2007, 2008and2009, resulting from increases inexemption limits, whichincluded the figure of £374 for a single person.Will he inform memberswhether this sum wasthe total tax reduction over the 3 year period or the tax reduction in eachofthose years?

Answer

The £374 is the total reduction in tax for the 3 years. The reduction, split between years, is £76 for the 2007 increase, £200 for the 2008 increase and £98 for the 2009 increase.

Question

2. N o t w ithstanding the impactof the increases in exemption limits, the Minister requestedon13thMay 2008 in responsetomyquestionon average tax bills that I supplyevidence for any calculation onGST bills. Does the Ministeraccept that:

1. the Household Expenditure Survey(HES) 2004/5, conducted in September2005,provides the best evidencewe have ofspendingpatternsof, and henceGST bills on, Island residents?
2. The appropriateuprating for inflation from these figures isof7.4%to March 2008?
3. Usingthese uprated figures provides a soundmethod for the assessmentoftheimpactofGST, eliminating housing costsandotherexempt items, on particular sectors of society?
4. Further, that the sevengroupsincluded in the analysisinChapter 3 ofHES are usefulinmeasuring the impactofGST?

Answer

2(a) Y es; but the primary purpose of the Household Expenditure Survey is to provide information on

household budgets as a basis for the calculation of the Retail Price s Index. It provides useful information on spending patterns for households that can be used to estimate the impact of GST on households.  However any estimates prepared on this basis are subject to several caveats:

• An estimated adjustment must be made in respect of those expenditure lines that comprise a mixture of taxable supplies and exempt supplies.

• An estimated adjustment must be made to take into account those goods and services purchased from suppliers that are not GST registered.

• The HES is based on a statistical sample adjusted to represent a notional "typical" household.

• The survey was conducted in 2004/5 and spending patterns may have changed since that time.

In view of these caveats the estimation of the change in GST borne under different GST scenarios will, as a rule, be more accurate than the absolute figure for a household.

2(b) N o; the States Statistics Unit maintain detailed Retail Price s Index data. It would be preferable to

use their data rather than a single figure. The change in RPI between March 2005 (121.9) and March 2008

(134.5) is 10.3%.

2(c) Y es; subject to the caveats noted above this method can be used to provide estimates. 2(d) A n s w er as above.

Question

3. D o es he then accept my figure of around £950 as the annual tax raised by GST from the average householdin Jersey, according to the updated HES data above, and if not, what figure does hehave?

Answer

No I do not accept the figure. Using detailed RPI indices and adjusting for the factors above the estimated figure for an average household is £626.

Question

4. W  i llhe also produce figures based on this HES data for the 6 groups featured in this survey, namely single pensioners,pensionercouples, single parents, couples with andwithoutchildren and single persons?

Answer

See spreadsheet attached. Question

5. W il l healsoproduce figures fortheGSTimposed on thelowest quintile (20%)of earners given in Chapter 2 ofHES,andstatewhetheritmatches the £340 per annumofmy calculations? Willhe then examinethe additional sums allocated to compensate those on Income Support for the impact of GST and state whether hecanshow that this compensation is adequate?

Answer

Using detailed RPI indices and adjusting for factors described above the estimated figure for the lowest quintile is £271 rather than the figure quoted.

The average sum allocated to compensate those on income support for GST is £318 per annum, which is more than the average cost of GST to households in the bottom quintile.

Couple with at Couple (both least one not dependant

enario 1 pensioners) child nual Expenditure per

usehold (2004/5

DJUSTED TO 2008

SING RPI) 44,972 60,994

xpenditure on zero-

ed goods and

rvices 10,244 13,684 xpenditure on zero

ed goods and

rvices included in

ixed" expenditure 1,946 2,071 32,782 45,239

Single

parent at Person

least one living alone Person Two or

dependant (not living alone more

child pensioner) (pensioner) pensioners Other

31,045 22,932 16,180 31,692 50,324 7,840 6,309 3,921 4,088 7,690

740 866 707 2,253 2,625 22,465 15,757 11,552 25,351 40,008

xpenditure on exempt

ods and services

cluding financial

rvices) 7,428 13,096 5,857 3,629 2,073 4,418 8,817 xpenditure on goods

d services supplied

 businesess below

eshold 2,243 2,904 1,550 1,083 842 1,755 2,725 23,110 29,240 15,058 11,045 8,637 19,178 28,466

ST 693 877 452 331 259 575 854

All Quintile 1 Quintile 2 Quintile 3 Quintile 4 Quintile 5 households

nual Expenditure per household

004/5 ADJUSTED TO 2008 USING

PI COMPONENTS) 1 16,123 22,092 34,054 49,616 86,011 40,511

xpenditure on zero-rated goods and

rvices 3,739 5,593 8,054 9,604 16,740 8,559 xpenditure on zero rated goods and

rvices included in "mixed"

penditure 494 795 1,340 1,948 4,351 1,729 11,891 15,704 24,660 38,064 64,920 30,222

xpenditure on exempt goods and

rvices (including financial services) 1,922 2,580 5,331 9,683 18,462 7,334 xpenditure on goods and services

pplied by businesess below

eshold 923 1,193 1,732 2,546 3,993 2,029 9,046 11,931 17,597 25,835 42,465 20,859

ST 271 358 528 775 1,274 626