Last year the States backed Treasury Minister Susie Pinel’s proposals to move the two-thirds of income taxpayers who pay one year in arrears to a current-year basis, with the aim of modernising the system. The 2019 tax liability was frozen for those affected, with rules to be agreed so the debt can be paid off over a longer period.
But a review of the proposed regulations, carried out by the Corporate Services Scrutiny Panel, has flagged potential issues for divorcing couples in determining who should pay off a joint 2019 tax debt.
Under the current regime, a husband is responsible for his wife’s tax affairs, unless she chooses to apply for a separate assessment.
‘A key failing of the regulations is the lack of recognition that the 2019 liability imposes added pressure and concern among couples who are seeking divorce or civil partnership dissolution,’ the panel said. ‘The husband or “spouse A” would be left liable for the payment of 2019 liability following a divorce or dissolution and it remains unclear as to how this will be split when independent taxation is brought into force or if a couple divorce before it is implemented.’
Under the minister’s initial proposals, the 2019 liability would have been suspended and repaid over five to ten years. But in October, following a consultation and States debate, the Treasury announced two revised ‘draft options’ for repayment over a much longer period – one of which would see the liability suspended until someone retires and the other was a 20-year plan.
The extra revenue generated by two-thirds of taxpayers paying their lifetime liability had been earmarked to help pay off the debt created by the Covid-19 crisis.
The panel’s report raises concerns that the extended period of repayment under the revised options will now mean revenue is gathered less quickly by the Treasury Department.
‘While the extended period of payment liability over 20 years makes payment more manageable for taxpayers, it will have a significant impact on the management of government expenditure and increases the risk that some of the due amount will not be recoverable,’ the panel said.
The panel was planning to table two amendments to the Treasury Minister’s repayment regulations at this week’s sitting, which starts today.
The first asks that 2019 liability collections are reviewed in ten years, while the second seeks to adjust the regulations to ensure retirees’ contributions to paying off the liability are recognised.
Senator Kristina Moore, who chairs the Corporate Services Scrutiny Panel, said: ‘While the revised proposals address many of the concerns expressed by taxpayers in focus groups, there are many ways the regulations could be clarified to assist taxpayers. The panel has significant concerns about the manpower and systems in place to support delivery and Revenue Jersey has not adequately budgeted for the cost of implementing these changes. We urge the Treasury Minister to reflect on our recommendations and incorporate our amendments into the regulations as soon as is feasible.’
