The official version of this document can be found via the PDF button.
The below content has been automatically generated from the original PDF and some formatting may have been lost, therefore it should not be relied upon to extract citations or propose amendments.
1240/5(5811)
WRITTEN QUESTION TO THE MINISTER FOR TREASURY AND RESOURCES BY DEPUTY T.M. PITMAN OF ST. HELIER
ANSWER TO BE TABLED ON TUESDAY 16th NOVEMBER 2010
Question
"Would the Minister indicate how much increased income from taxation would result by increasing the tax rate to those with incomes over £120,000 to 25%; further still, what factual evidence, if any, exists to indicate that such an increase would result in such individuals leaving the Island?"
Answer
There seems to be an assumption that an increase in the income tax rate will result in a directly comparable increase in tax revenues. This assumption is fundamentally flawed.
The amount of income chargeable to tax over £120,000 for individuals for the last complete set of assessments i.e. 2008 is £251 million. Assuming an increase to 25% for these taxpayers did not result in a change in taxpayer behaviour, such an increase would yield an extra £12.6 million. But in reality, it is more likely to result in a decrease in tax revenues.
To repeat what I said in the budget launch speech:
"I recognise there is a clear disparity within the population between those who feel that a higher rate of tax will be fair, and those who think it would seriously damage our economy. Those who favour a higher rate of tax believe we can tax the better off significantly more, without any impact on the Island as a whole. This fails to recognise the mobility of international business. If business moves elsewhere, this would result in a loss of jobs and a loss of tax revenue, leaving a higher tax burden for the rest of us. It is now clear that our closest neighbour and one of our competitors will retain a 20% income tax rate.
The Council of Ministers has given careful consideration to the arguments for and against the higher rate of tax - and has concluded that 20% makes a clear statement of stability. 20% has formed one of the island's key elements of stability and economic success for more than 60 years and I believe the States Assembly should send out a strong and powerful message that Jersey will maintain the 20% rate"
Whilst it is difficult to prove the extent to which individuals affected by such an increase would leave the Island, there is a considerable feedback from the Finance Industry, other bodies and media correspondence that the "headline" 20% tax rate in Jersey remains a significant attraction for businesses and individuals alike. This is a critical time for the Island in retaining its most lucrative businesses and individuals – we must demonstrate that we wish to keep them if we are not to see a drift away of our primary sources of tax revenues. Once lost those individuals and businesses would be much harder to attract back.