During yesterday’s States sitting, Deputy Susie Pinel also said that the burden to replenish Jersey’s cash reserves would not fall on middle earners, pointing out that at present many Islanders paid no tax at all, due to the generous exemption threshold.
The government has repeatedly said that it would aim to rebuild the Strategic Reserve, known as the rainy day fund, post-crisis with hundreds of millions being withdrawn from the fund now to combat Covid-19. The rainy day fund was worth an estimated £880 million in February, just before the Covid-19 crisis.
Deputy Pinel said that the tax regime would have to be reviewed to ‘help restore government finances’.
‘I will be reviewing options for raising taxes with ministerial colleagues looking at which areas of taxation ought to be reviewed in the short to medium-term.
‘We have to appreciate that the wealthy, or very wealthy, residents that we have do provide a huge amount of our income tax and that should not be ignored,’ she said in response to questioning from Deputy Geoff Southern.
‘They provide – from memory – about 62% of tax, based on 2017 figures. We have got to be careful about how we define who pays tax and who does not and, as I mentioned in a previous answer, there is a considerable amount, about 32% of Islanders, who do not pay tax at all.’
Deputy Inna Gardiner asked if the burden of tax increases would be placed on Jersey’s middle-level earners.
The minister said that her department would be conducting an ‘across-the-board’ review of taxation and would aim to keep it ‘balanced’ across all of society.
‘The major part of the tax revenue is from the finance sector,’ she said.
‘And there will be a large proportion of the population that do not pay any tax at all because our tax threshold, at almost £16,000 for an individual, is one of the highest.
‘So, there are a lot of people on the lower end of the scale who do not pay any tax at all. The middle earners, to which the Deputy refers, should not carry the burden.’
Writing for the JEP’s Coping in a Crisis supplement (published today), Economic Development Minister Lyndon Farnham said that the government would need to use ‘significant funds’ to support businesses through the crisis and also advocated replenishing the Rainy Day Fund.
‘If our businesses, which are the beating heart of our economy, fail, they will not be able to provide the products, services, leisure activities and jobs we need locally to get us back out of recession,’ he said.
‘As our economy recovers, we will need to work together to replenish our reserves in the coming years. We will work with businesses to make sure this is done in a sensible way that is affordable for us all.’
But Brendan Carolan, Jersey secretary of the National Education Union, criticised the government for its ‘pessimism’, urging the government to instead replenish the fund over a much longer period.
‘They tell us to expect higher tax rates and a pessimistic situation to exist for several years after we have overcome the pandemic,’ he said.
‘In the grand scheme, it matters little whether it takes us 30 years to replenish what we draw out of this fund because I am sure we would all agree that it is metaphorically now raining so badly.
‘The UK government will borrow and go into debt to unprecedented levels not experienced since the war because they understand what they will need to do, whereas Jersey, which has an accumulated store of wealth and may not need to borrow, acts with rudderless timidity by comparison.’
Meanwhile, Graeme Smith of Jersey Business, called for the government to keep investing in the economy post-crisis to ensure that it recovers.
- For interviews and comment pieces with Graeme Smith and Brendan Carolan, see today’s business section.
