Everyone to pay tax on current earnings
ALL Islanders may start paying tax on their current-year earnings before the end of 2020 in a move aimed at helping those whose incomes have plummeted during the Covid-19 crisis.
The move would affect two-thirds of Jersey taxpayers – 45,000 people – who would have their 2019 liability frozen until 2023 and would probably be asked to pay it back over a five- to ten-year period.
Those who pay on a prior-year basis would, for example, normally pay their 2019 liability in 2020 through ITIS contributions, which are deducted from their salary, or payments on account, which are made in May and November.
But many Islanders’ incomes have dropped dramatically this year, meaning that they could struggle to settle their 2019 bill on this year’s earnings.
Yesterday, Treasury Minister Susie Pinel announced her plans to move all taxpayers to current-year basis, as the final part of the government’s £150 million ‘kickstart’ fiscal stimulus package, which was outlined earlier this month.
An amendment to the tax law to enable her proposals, which it is hoped will give the economy an £18 million boost and help Islanders avoid expensive bills at the end of the year, will be tabled for States debate in October.
It has been planned for some time to move all Jersey taxpayers onto a current-year basis, but the minister said that the Covid-19 pandemic had accelerated the reform process.
Under the proposals, all tax payments made this year would be put towards 2020 – rather than 2019 – tax, with last year’s liability being frozen until January 2023 with a range of repayment options being developed.
‘Pay on account’ taxpayers, such as the self-employed and landlords, would have the option of not making a payment in November 2020.
The exact amount of tax payable for 2020 would be calculated and confirmed in 2021 following receipt of 2020 tax returns, which is the same regime applied to existing current-year basis payers.
Anyone who has become employed in Jersey since 2006 already pays tax on the current-year basis. All taxpayers will be written to over the next week to advise them on the changes.
‘The prospect of making large-scale changes to Jersey’s tax system is incredibly complex, which is why I’m making an announcement today, surveying Islanders from 3 August to 4 September, and providing information via letters and leaflets,’ said Deputy Pinel.
‘The delay in abolishing prior-year tax has always been the challenge of how taxpayers pay their “year in arrears” tax when they move from a prior-year basis to a current-year basis. They will always have this tax liability and at the moment it is usually paid when a person leaves the Island or retires.
‘Under the proposal, we would be looking for the 2019 tax to be paid over between five and ten years, although we are keen to gather Islanders’ views on payment options and these will need to be agreed by the States Assembly next year.’
The government says that the move will allow further tax reforms to take place, bringing the Island in line with international best practice.
A further set of regulations, to be debated by the States in spring 2021, is due to be developed following consultation to determine how affected Islanders will pay back their frozen 2019 tax liability.
A survey on the tax reform proposal and the payment options is being launched on 3 August, online at gov.je/TaxReform and with paper to be available at the parish halls, the Jersey Library and Citizens Advice.
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