As the government seeks to bring forward a plan to make all taxpayers pay income tax on a current-year basis, an ex-minister’s petition to write off a year’s worth of tax liability when the change is made has already garnered almost 2,500 signatures.
Former Senator Ben Shenton’s proposal was launched on Monday morning, but ex-Treasury Minister Philip Ozouf has opposed the suggestion from his previous ministerial colleague.
Announcing her department’s initiative last week, Treasury Minister Susie Pinel said the intention was to alleviate some of the financial distress caused to many Islanders as a result of the coronavirus pandemic.
Deputy Pinel said the move would form part of the government’s package of fiscal stimulus measures and said she hoped it would be debated and supported by States Members in October.
In a statement yesterday she explained that writing off the 2019 tax liability of all 45,000 people who pay their tax in arrears – two-thirds of the total number of taxpayers – would cost the Island £320 million.
‘Such a move would not be fair to prior-year taxpayers who have already paid off their liability, or to current-year taxpayers,’ she added.
Mr Shenton described the proposal as unjust and disgraceful, saying it would hit thousands of Islanders who made up ‘middle Jersey’.
‘The government are trying to dress this up as some form of efficiency move, but it will have a negative effect on a large proportion of Islanders when what is needed are proper efficiencies and management of the economy,’ he said.
‘The Island is in a good place, with a strong asset base and a hard-working population, but we have been badly managed – the government should be using its asset base rather than taking from the pockets of pensioners and middle Jersey.’
The Island should emulate Guernsey, Mr Shenton argued, in writing off the tax liability from the prior year as part of the change. He added that he hoped the petition would go well beyond the 5,000-signature threshold required to get the issue considered for a possible States debate.
Islanders have previously reacted in large numbers to proposed tax changes. A petition opposing the introduction of GST in 2007 eventually attracted more than 19,000 signatures and led to mass rallies, while a further petition in 2010 saw more than 5,000 declare their opposition to a rise in GST from 3% to 5%.
In a letter which is being sent to all taxpayers, Deputy Pinel said: ‘I want to be clear that we are not in a position to write off the 2019 liability for prior-year taxpayers, particularly in the light of additional costs for the government related to Covid-19.’
Tax bills for 2019 would be put on hold for two years, Deputy Pinel added, but would need to be repaid from January 2023 ‘over a manageable number of years’.
Mr Ozouf, who was Treasury Minister from 2008 to 2014, said that he would support the move to a current-year basis, but only after proper consultation, analysis and scrutiny.
‘You shouldn’t announce a major policy change like this in the middle of the summer-break and then expect to rush it through the Assembly by October,’ he said.
‘This is a massive move that will change our future. It will affect thousands of people and it should be treated with the respect it deserves – and should not rely on a fiction of a consultation over the summer.’
Transition arrangements for the switch need to be fair, Mr Ozouf added. He said he was opposed to a year’s tax liability being written off, describing Mr Shenton’s position as ‘a one-sided opinion poll’ and estimating the ‘unfair’ move could cost around half of the sum generated by income tax in 2019, which was £586 million.
‘Writing off hundreds of millions of pounds without proper consultation is not right – it would be enough to build half the Hospital,’ he said.
‘I understand that nobody wants to pay more tax and people will of course vote for the tax bill to be written off. It doesn’t make it right and it is not. If something sounds too good to be true, then it probably is. It is unfair to burden a future generation with the obligations of the past.’
Income tax is collected on a prior-year basis from those who registered as taxpayers before the start of 2006. Those who registered after that date pay tax for the current year.
Mr Ozouf called on ministers and Treasury officials to reassess the situation.
‘They need to do things properly, as Islanders deserve and have a democratic right to expect,’ he said.