GST Personal Importation Review: Phase 1 (S.R. 15/2021) – Response of the Minister for Treasury and Resources

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Comments

1

Revenue  Jersey  has  undertaken  a review of the GST Personal Importation system to ensure that Jersey would be a "fast  follower"  of  developments  on customs taxation in the UK, and thus establishing a more level playing field between goods sold on the high street in Jersey and those imported via online stores.  

It is a long-standing commitment of successive Governments to be a "fast follower" of the EU and (since Brexit) the UK in requiring large retailers to  register  to  pay  VAT  in  the  countries  of destination of their supplies of goods.

This would further "level the playing field" in Jersey's marketplace between goods imported by local businesses for retail sale and goods imported direct  by  private  individuals  from  offshore retailers. Being a "fast follower" rather than an "early adopter" reduces the risk that large offshore retailers might restrict the range of goods they offer for sale in Jersey.

The  Review  was  led  by  Revenue  Jersey  but represents  a  collaboration  between  Revenue Jersey and Jersey Customs, drawing on import data largely held by Jersey Customs and existing GST registration data held by Revenue Jersey. Some  of  this  data  is  taxpayer-confidential  and cannot  be  shared  with  the  Panel  but,  where possible, officers have provided aggregated data, suitably anonymised, in private briefings.

2

If  approved  in  the  Government  Plan 2022-25 the GST de minimis will be lowered from £135 to £60 on the 1st

Offshore  retailers  whose  aggregate  value  of dispatches  to  Jersey  exceed  £300,000  will  be

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January  2023,  with  offshore  retailers whose imports exceed £300,000 to be required to charge GST at the point of sale.

obliged to register for GST; others may register voluntarily.

3

The GST de minimis if lowered on the 1st  January  2023  will,  according  to Revenue Jersey, enable the necessary changes to software and administration to be made by key logistics firms and retailers.

It is normal practice to allow a suitable time period for businesses to make changes to accounting and till systems to adopt new VAT/GST legislation. A full year is considered sufficient on this occasion.

4

Revenue Jersey did engage with some of  the  larger  offshore  retailers (including  Amazon)  whilst  gathering evidence  for  its  GST  Personal Importation review and has reported its interpretation  of  the  outcome  of  this engagement in its report, but the direct detail has remained confidential and has not  been  shared  with  scrutiny  or stakeholders to enable justification of key decisions.

Revenue Jersey has not received permission to share the limited written communications it has received which largely were transacted under the normal rules binding the Comptroller (and the Agent) to taxpayer confidentiality.

The  Minister  did  offer  the  Comptroller's assistance to the Panel to help them seek to engage with some offshore stakeholders. While that offer remains  open,  it  is  likely  that  large  offshore retailers will make their views known publicly if they do have substantive concerns with the draft legislation.

The  draft  legislation  has  now  been  circulated widely in the UK through the auspices of the Confederation of British Industry and the British Retail Consortium.

5

Smaller  offshore  retailers  whose imports  are  less  than  £300,000  will continue to utilise the existing systems of declaration. However, concern has been raised that the existing systems are over complicated and time consuming for both business and consumers.

Smaller offshore retailers can register for GST voluntarily which would ease movement of their goods into Jersey and that approach appears to be supported  by  local  businesses  concerned  in delivering their goods.

It is not clear if the difficulties encountered by both business and consumers relate to changes imposed due to BREXIT. Importing goods from the EU has become more complicated and the use of  professional  customs  agents  is  often recommended.

The draft Government Plan provides funding to improve the customer portal within the CAESAR

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system, but the changes cannot mitigate the new formalities imposed by BREXIT.

6

Revenue Jersey has not provided data sets  within  its  report  or  in  the Government  Plan  to  substantiate  and justify the reduction to a £60 GST de- minimis and concern has been raised by core stakeholders that some of the data may not have been suitably extracted.

Available data has been shared by Jersey Customs with the Sub-Panel. Inevitably, limited data exists with regard to movements of goods below the existing  De  Minimis  level.   The  Sub-Panel  is invited to share the detail of concerns with the Minister.

It is however, because of lack of extensive data on lower-value consignments (below the existing De Minimis level), prudent to move to a lower De Minimis level of £60 as the next step - rather than move directly to abolish the De Minimis level.

7

The impact of changes to the GST de- minimis for low-income families and the use of the Community Cost Bonus was not considered by Revenue Jersey in its review.

This  issue  was  not  included  in  the  Review's Terms of Reference (provided to the Panel early in 2021) because the De Minimis level is not a tax allowance  and  would  probably  be  unlawfully discriminatory if it were.

Since  the  inception  of  GST,  successive Governments have provided  - and improved – what started out as the GST Bonus and is now the Community Cost Bonus.

The GST Bonus calculation examined the average household  shopping  basket  of  lower-income families and assumed all goods would be bought at GST-inclusive prices in Jersey. The Bonus has been  revalorised  since  to  take  account  of  the increase  in  GST  (from  3%  to  5%)  and  other considerations, including inflation. To this extent, due regard has already been given to the additional costs of GST.

8

The proposed Government Plan 2022- 25 provides for additional funding to improve the customer portal and other software within the Customs and Excise System  for  the  Administration  of Revenue system, to make it easier for Islanders  to  make  declarations  about private importations and to account for GST not charged at the point of sale.

The draft Government Plan provides funding to improve the customer portal within the CAESAR system, but the changes cannot mitigate the new formalities imposed by BREXIT.

A  more  fundamental  contract  review  of  the CAESAR system will also be taking place over the coming years.

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9

Although Royal Mail have undertaken to manifest all goods coming to Jersey from the Spring of 2022, the Revenue Jersey report is silent on any potential consequences of this action. Royal Mail were  not  contacted  or  engaged  by Revenue  Jersey  as  part  of  the consultation process for its review.

This issue of manifesting fell outside the Terms of Reference of the Review but would be a welcome development which was noted in the Report of the Review and which will improve the movement of goods and the proper collection of GST.

10

Any  failure  of  offshore  retailers  to register with Jersey and take payment at the point of sale could be problematic for logistic providers as they will be at the  front  line  of  processing unmanifested goods and could require additional  storage  and  costs  to consumers.

The registration of offshore retailers may actually reduce (rather than increase) the volume of such logistics  problems.   Consumers  will  remain responsible  for  accounting  for  Import  GST  on goods bought from unregistered offshore retailers using existing processes.

11

The proposed Government Plan 2022- 25  accounts  for  additional  staff  who will be required to administer the lower GST  de  minimis  level.  The  project summary also identified that additional staff  will  be  provided  consisting  of three core roles: - Call Advisers based at  Customer  and  Local  Services;  - Office Assistants responding to more complex  enquiries  based  at  Jersey Customs and Immigration services; and A Warehouse Officer responsible for the storage and disposal of goods based at  Jersey  Customs  and  Immigration services.

The  Government  expects  to  maintain  a  5:1 cost/benefit ratio on the recovery of GST at the margin of the De Minimis level.

12

The  project  summary  in  the Government Plan 2022-25 outlines that the additional GST receipts will yield "£1.3  million"  and  will  be  offset  by more consignments detained by Jersey Customs and Immigration Services.

The exact revenue benefit is likely to become clear later  in  2024.   The  Government  expects  to maintain a 5:1 cost/benefit ratio on the recovery of GST at the margin of the De Minimis level.

13

Evidence gathered by the Panel would suggest  that  other  countries  provide various GST exemptions for imported

The  Panel's  research  appears  to  encompass structural reliefs (such as exemptions and zero- ratings)  applying  to  all  goods  (domestically

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goods  which  were  not  considered  as part of the Revenue Jersey review.

The Government has no plans to deviate from the "low, broad and simple" principle for GST. If the GST de Minimis level is eventually removed then the States Assembly would wish to consider the introduction  of  a  modest  "gift  relief"  for occasional gifts sent to islanders from friends and relatives overseas.

14

Evidence would suggest to the Panel that VAT is not being removed from items sold by various offshore retailers

Very  little  evidence  has  been  presented  to Revenue Jersey of this nature in recent years but the  Minister  would  be  happy  to  review  any evidence which the Panel can share.

9 out of 10 of the largest offshore retailers do not charge UK VAT: the one that does will refund it on  request. Very  limited  evidence  of  overt charging  of  UK  VAT  has  been  presented  to Revenue  Jersey.   Where  it  has  occurred  and individuals  and  businesses  have  been unsuccessful in securing VAT zero-rating on UK exports, Revenue Jersey has been prepared where appropriate to provide letters of support.

Revenue Jersey most recently asked leading UK representative bodies to remind their members of Jersey's  tax  status  in  December  2021. The Government  has  limited  scope  to  influence smaller offshore retailers in this regard but the legislative changes now enacted in the Finance (Budget 2022) Law will further discourage such a practice.

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1

The Minister for Treasury and  Resources  must immediately  release  the detail  of  Revenue Jersey's communications with offshore retailers to scrutiny  to  provide transparency  in  decision making.

MT R

Reject

Both the Minister and the Comptroller of Revenue have explained to the Panel the constraints on sharing communications which were conducted under terms of commercial  and/or  taxpayer confidentiality or of exposing in detail the data which the Comptroller and the Agent of the Impots hold by virtue of their offices.

Written  correspondence  has  tended  to focus on matters peculiar to the business corresponding with the Comptroller or the Agent.

The  Minister  notes  that  the  Panel proposes  to  keep  various  items  of correspondence  "confidential  to  the Panel"  and  should  therefore  readily understand  that  Jersey's  statutory officers  (the  Comptroller  of  Revenue and the Agent of the Impots) who have led this project work have sworn Oaths of  Office  which  do  require  them  to observe taxpayer confidentiality where it is appropriate to do so.

The Minister has previously offered the Panel the assistance of the Comptroller in  reaching  out  to  some  of  the (particularly offshore) stakeholders who have been consulted. This offer remains open but it is more likely now that any strong  objections  to  the  proposed changes  would  be  aired  in  public following  the  passage  of  the  draft Finance (2022 Budget) Law.

N/A

2

The Minister for Treasury and  Resources  should commit  to  lowering  the GST de minimis to zero and provide a roadmap to outline  Revenue  Jersey and  affiliated

MT R

Partially accept

The  Minister  in  her  Budget  speech reiterated her personal commitment to working  to  eliminate  the  De  Minimis level.

The  Minister  does  not  consider  it appropriate at this stage in the life of the

31/7/2025

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organisation's (including Jersey Post and the Jersey Customs  and Immigration  Service) work  programme  to deliver this reduction.

Assembly to set out a detailed roadmap to deliver that. Further work on the GST De Minimis level is not proposed in the draft Government Plan. Officers will review  the  position  in  the  light  of experience  of  the  new  registration regime  and  the  reduced  De  Minimis level after more data becomes available in 2024. It may be possible for the next Government to make further proposals in the draft Government Plan for 2025.

The Minister would flag that – were the De Minimis level to be removed – the Assembly  would  probably  wish  to consider introducing a form of lower- value  relief  for  occasional  gifts  from family  and  friends  overseas  and  that arrangements would also need to be put in place for very low-value items which have nominal but essentially no intrinsic value (for example, sales catalogues).

3

The Minister for Treasury and  Resources  must ensure that relevant data sets and calculations used to substantiate and justify a reduction to both a £60 GST de minimis and a £0 de minimis are provided to  the  States  Assembly and  stakeholders  to inform  decision  making in  advance  of  the Government Plan debate.

MT R

Reject

The  Agent  of  the  Impots  has  already shared currently-available data with the Panel in a private briefing which leads him to recommend the £60 level. His Oath of Office limits the scope to share widely. The Panel is free to share their findings based on the aggregated data they have seen.

The  De  Minimis  level  is  an administrative  matter  –  based  purely upon value-for-money considerations – taken by statutory officers: it is not a political decision per se as it is not a tax allowance  (and  would  probably  be illegally discriminatory if it were).

Historically,  the  Treasury  Minister informs  the  States  Assembly  of  the current  assessment  by  her  statutory officers of where the De Minimis level

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can  be  set  and  seeks  the  Assembly's general approval for that.

4

The Minister for Treasury and  Resources  must clarify  to  the  Assembly the reporting framework for  GST  importation  to ensure  it  can  assist Ministers and Officers to developing  long  term policies  in  a  wider context in advance of the Government Plan debate.

MT R

Reject

The  data  that  is  available  regarding unaccompanied  personal  importations only exists for consignments having an aggregate value above the existing De Minimis level. As the De Minimis level reduces,  more  data  will  become available  (from  2024  onwards).   The increased manifesting of goods will also improve this situation.

5

The Minister for Treasury and  Resources  should publish a report outlining the expected income to be gained for the Island from GST receipts before and after  the  application  of changes  to  the  GST  de minimis, whilst outlining a  longer-term  plan  for prospective collection of GST on all imports and the  level  of  investment required to accommodate this  change,  in  order  to help shape debates on the future  of  the  GST  de minimis.

MT R

Partially accept

The estimated additional revenue from this measure is published in the draft Government Plan (Table 22, Page 141).

Actual  receipts  could  be  reported  in 2024.

In the event that Ministers embark on a further review with a view to eliminating the  De  Minimis  level,  costing  and planning  will  be  undertaken  at  the appropriate stage of the project's life.

31/5/2024

6

Subject  to  the  GST proposal being agreed in the  Government  Plan 2022-2025,  the  Minister for  Treasury  and Resources  must  ensure that an impact assessment to  consider  the consequences  of  a

MT R

Reject

The  Minister  will  discuss  the  Panel's view with the responsible Minister – the Social Security Minister. It would not be appropriate for the Minister to undertake an  impact  assessment  of  the  type requested.

The Minister recognises that the original GST Bonus (the predecessor benefit to

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reduction in de minimis for  low-income  families is prepared in 2022 and that consideration is also given  to  making adjustments  to  the Community  Cost  Bonus in the Government Plan 2023-2026.

the  Community  Cost  Bonus)  has assumed  that  the  basket  of  food  and goods  bought  by  lower-income households  is  all  bought  in  Jersey  at GST-inclusive prices.

The  Minister  is  not  immediately persuaded that further enhancement of the  Community  Cost  Bonus  is warranted.

7

The Minister for Treasury and  Resources  must ensure  that  support  and written  guidance  is available for any islander that  requests  it  to  help them  fully  understand GST  Personal Importation,  and  the Minister  must communicate to islanders in  2022  the  changes  to GST  Personal Importation will not have a negative impact on the Island's  supply  chains, whilst  providing  a  clear and  transparent understanding  to Islanders  how  goods arriving  in  Jersey  are valued and charged GST.

MT R

Partially accept

The Government will, of course, provide appropriate levels of help and guidance to  islanders  (private  individuals  and businesses – offshore and onshore) to support this legislative change.

While work done to date indicates that offshore  retailers  are  preparing  to comply with Jersey's GST registration requirements, it is not possible fully to anticipate  the  responses  of  all  larger offshore businesses to the obligation to charge GST at the point of sale.

The fall-back position, of course, is that the  existing  facility  will  remain  for islanders to pay Import GST themselves when goods arrive in the Island.

Early  confirmation  of  legislation, implementing changes from 2024, has given offshore retailers the certainty to plan for the changes. It will also help identify any problem areas which may need addressing.

Jersey  Customs  does  already  publish information about how goods are valued for Customs purposes.

31/10/202 2

8

The Minister for Treasury and  Resources  must consider  as  a  matter  of

MT R

Partially accept

Existing contract commitments already provide stability for service provision. Additionally,  a  longer-term  review  is being conducted to determine whether

No  sooner than 31/7/2023

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urgency  the  need  for  a new,  bespoke  customs and  freight  management system,  including  the customer portal, to fully coordinate and update all aspects  of  the  Customs and  Excise  system,  and report  back  to  the Assembly by the end of April 2022.

the existing system is best value in terms of  cost  and  functionality.  The  review may lead to a draft Business Case for new systems which, if supported, would be presented to the Assembly in a future draft Government Plan.

It should be noted that the system does not  just  administer  the  collection  of import  GST.  It  also  collects  excise duties, third country duties and Vehicle Emissions Duty. It also imposes controls on the movement of goods per Jersey's obligations  under  the  UK-Jersey Customs Arrangement and polices the application of the Island's international responsibilities such as the transfer of strategic goods.

A complete replacement of the current online goods clearance system would be a very significant and costly undertaking and so would need addressing in a future Government plan.

9

The Minister for Treasury and  Resources  must monitor  the  impact  on customer  choice, revenue,  stakeholders, and to the Government's workforce, of the Royal Mail  manifesting  goods on  a  quarterly  basis  in 2022 and 2023 through a series  of  quarterly progress  reports  to  be provided to the Corporate Services  Scrutiny  Panel regarding  customer choice,  to  provide reassurance  to  the Assembly that sufficient funding  has  been allocated in the proposed

MT R

Reject

The manifesting of more imported goods is a matter for the postal authorities of the UK and Jersey – not Government per se.

Jersey  Customs  will  benefit  from improved  manifesting  and  Treasury officers  will  be  kept  abreast  of  its development.

The Minister is content to take questions at  her  quarterly  public  hearings  but stresses that consumer affairs do not sit within her portfolio.

The Government expects that the Jersey Consumer  Council  will  continue  to monitor issues of consumer choice and any inappropriate charging of UK VAT

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Government  Plan  2022- 25  to  account  for  this change  prior  to  the debate.

and can report on such matters in the public domain.

10

Revenue  Jersey  and Jersey  Customs  and Immigration  Services should develop terms of reference  for  a  working group  with  the  logistics industry to ensure:

• all  questions  are addressed, and processes agreed  especially  in relation to valuation and returns; and

• stakeholder capabilities match demand.

MT R

Accept

Jersey  Customs  will  establish  the necessary lines of communication and, where  appropriate,  working  groups  to manage  implementation  of  changes affecting local logistics businesses.

28/2/2022

11

The Minister for Treasury and  Resources  should review  the  provision  of GST  exemptions  for imported  goods  and consider any exemptions required  due  to limitations  on  customer choice or health grounds.

MT R

Reject

Apart from the De Minimis level – which is an administrative easement given on Value-for-Money grounds - GST reliefs based  on  considerations  of  consumer choice; health etc could not be limited to business-to-customer  imported  goods without  being  potentially  unlawfully discriminatory.

The Government remains committed to GST  remaining  at  a  low  rate  (5%); broadly applied (with minimal reliefs); and  simple  (to  administer  –  both  for businesses and Government).

12

The Minister for Treasury and  Resources  should immediately evidence the work which the Revenue Jersey report suggests it has  completed  in  recent years  to  discourage  the removal  of  VAT  and

MT R

Reject

Report  R51/2018  and  subsequent responses to Questions in the Assembly are on the public record and do set out much  of  the  work  done.   The Comptroller  is  unable  to  share correspondence addressed to individual businesses,  for  example,  identified  by the  Jersey  Consumer  Council  as

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consider  if  any  other actions could be taken to coincide with changes to the  registration  process for offshore retailer

charging UK VAT for reasons of tax confidentiality.

The report of the GST review identifies that - of the "top ten" offshore retailers by  volume  -  only  one  of  them  does charge VAT and it does refund it on request. Three of the top ten do already charge GST and remit it to the Jersey Exchequer.

The  Report  also  suggests  that  the imposition of GST obligations on larger offshore retailers will deter the charging of UK VAT where this still occurs.

It remains the strong view of the Minister that  consumers  really  should  not  buy goods from businesses in the UK that wrongly charge VAT.