Before we consider options for further taxation, it would be logical to make the case for why further taxation needs to be contemplated in the first place, since there are those inside and outside The Assembly who believe it is not. Very importantly, Islanders need to be fully aware of why this very contentious issue is continuing to be pursued by members of not just this Assembly – but a number of previous Assemblies too. We can very easily claim there is no need to gather more revenue – we can ‘cut our cloth’. Or, ‘we can grow our way out of the need to do so’. Taking an academic or even an ideological approach – both of these seem achievable and indeed to a degree action can be taken on both. But that denies the scale and quantum of what is needed.
if there is a need to increase taxation to provide sufficient revenues to maintain Public Services, then direct taxation and SI should not be our only options.
That quantum is simply a reflection of what we currently have in terms of Government Services but also – an indication of what we are going to need to continue to service that with greater demand, most specifically across Health provision. It is a fairly straightforward exercise to just cut off some services and save the cost of them. But the likely backlash from Islanders (given how much we would have to cut) would be considerable – and that puts Deputies in the invidious position of being hugely unpopular – or alternatively, being elected under false pretensions if they promise to solve this need for more revenue by assuming we can dispense with many or even some of the Public services that many rely on.
Where we have already been
In 2015 (2012-2016 Assembly) the States resolved:
“To acknowledge that there are risks and challenges associated with the States’ considerable reliance – by international standards – on direct personal taxes and social insurance contributions; and to agree in principle that it would be advantageous to diversify sources of States’ income in ways which take account of the principle of ‘ability to pay’.”
Billet d’État IV, 2015, Planning a Sustainable Future: The Personal Tax, Pension and Benefits Review
And again in 2017 (2016-2020) Assembly)
“To direct the Policy & Resources Committee, in developing its proposals for income measures from 2018 onwards, to consider the merits and disadvantages of any new forms of taxation, with the exception of taxes on capital; this recognises that there will be a clear presumption that over this period (in light of the island’s changing demographics) the tax base will broaden and diversify consistent with the principles of seeking a greater contribution from those individuals and entities most able to bear the burden.”
Billet d’État XII, 2017, Policy & Resource Plan – Phase 2
And again in January 2020 (the last Assembly)
The States of Guernsey resolved to undertake a review of the tax system (“The Tax Review”) in light of prospective long term pressures on finances.
Billet d’État I, Jan 2020 Policy & Resources
And in 2021 (The current Assembly)
“10.5. With two successive Assemblies recognising that the lack of diversity in the tax base is an issue, exacerbating this issue further by focussing entirely on revenue raising measure charged on income alone cannot be recommended”.
Billet d’État XIX, 2021 Policy & Resources The Tax Review
And in 2023
“What is clear is that the States cannot continue “as-is”. Latest forecasts estimate that, without action, cash reserves available to fund general revenue and capital expenditure will be depleted in just over 5 years. The Assembly therefore must agree measures to improve the current financial position so that the States can continue to afford the critical services they provide to the island, invest for future generations and improve services in response to community needs.”.
Billet d’État XVII Sep 2023 Policy & Resources, Funding & Investment Plan
And in 2024
“We have been operating a structural imbalance in our finances for a number of years – since the introduction of Zero-10 – where we are living off historic surpluses. The States have already resolved that this is unsustainable and should be addressed by the Assembly in the next term. However, we do not wish to handover a precarious financial position at the end of this term and are therefore proposing measures in this Budget that stabilise the position – it would be irresponsible not to. This is why we are taking steps now to protect the States’ financial resilience.”
Billet d’État XIX, 2024 Policy & Resources 2025 Budget
So, even 10 years ago (spanning 3 Assemblies), the need for taxation restructuring was known because we were (and are) far too reliant on direct personal taxes and social insurance contributions. In short, if there is a need to increase taxation to provide sufficient revenues to maintain Public Services, then direct taxation and Social Insurance should not be our only options. The culmination of not addressing the need for increased revenue raising came to a head in 2025 when the States finally agreed on the adoption of a GST which incorporates a complete overhaul of the inequitable Contributions Scheme. HOWEVER, that has to be endorsed by the 2025-2029 Assembly. Will the next Assembly see this through – and is it the right thing for Guernsey?
