Head or heart over GST vote

Senator Alan Breckon is proposing that GST should not be payable on food and domestic heating, and hearts will undoubtedly be moved by the principles underlying his proposition. Many will feel that it is simply wrong to tax life’s basic essentials – especially if it is to the potential detriment of the Island’s least well-off residents.

Heads, on the other hand, may be won over by the counter argument, put forcefully by Treasury Minister Philip Ozouf, who says that exempting any items from GST would simply increase the cost of collecting the tax and could well lead to further increases in the basic rate.

The Senator also bolsters this main argument by pointing out that special Income Support payments are made to minimise the impact of GST on the least wealthy and by highlighting the difficulties experienced in the UK over defining what qualifies as food for purposes of taxation.

Age Concern and other groups are emphatic that natural justice demands that there should be exemptions. They have also accused some States Members of being out of touch with the problems of not only of the elderly but also of younger people struggling to make ends meet. These are powerful emotional appeals to Members’ better natures, but, ultimately, the head must rule when it comes to framing tax policy – especially tax policy that is a crucial part of knocking public finances back into shape.

However, if the cold, hard facts of Senator Ozouf’s position are to prevail over Senator Breckon’s genuine instinct to protect the disadvantaged, Members should make it clear that although flat-rate GST at the five per cent level soon to be applied might be a necessary evil, a rethink will be essential if a rate rise is considered in the future.

It is also is incumbent on them to establish beyond all doubt that the compensatory Income Support provisions are working as well as possible and that ministers are not losing a grip on the three-pillar approach to recovery that must involve control of public spending and some measure of growth as well as taxation.

With UK Value Added Tax now at 20 per cent and comparable rates obtaining in many other parts of the world, government will always be tempted to use GST as a quick fiscal fix. That temptation must be resisted if succumbing to it means – through increased rates with no exemptions – imposing an unacceptable burden on the poorest in our community.