Proposals to ease impact of tax changes

ALLOWANCES to protect thousands of low-income couples from being left worse off by changes to the Island’s tax system will be introduced, the Treasury Minister has said.

Deputy Susie Pinel Picture: ROB CURRIE.
Deputy Susie Pinel Picture: ROB CURRIE.

Deputy Susie Pinel (pictured left) has lodged proposals which, if approved, would mean spouses and civil partners will have equal rights and responsibilities for their tax affairs. The move, which is planned to come into force in 2022, is the first step towards full independent taxation, where every person is responsible for their own tax matters regardless of marital status.

However, during a Corporate Services Scrutiny Panel hearing yesterday, the minister admitted that around 7,100 couples could be negatively impacted by the changes. This is because, under the shift to independent taxation, a £25,700 exemption for couples would no longer apply. Instead, only the £16,000 individual exemption rate would be applied to each person. Therefore if one person in a couple is either not working, or does not meet the threshold to pay income tax, then that couple would be worse off under the proposals.

Deputy Pinel said that a compensatory allowance would be made available to these couples for at least a period of ten years, beginning in 2024 when the changes would become mandatory – if given States approval.

Panel chairperson Senator Kristina Moore queried how the proposition met ‘the government’s own stated aims of taxation in Jersey being “low, broad, simple and fair’’.’

Comptroller of Revenue Richard Summersgill said that the compensatory allowance would be delivered to the earner in the married couple who was over the threshold. Meanwhile, a couple who were both on higher incomes could ‘potentially benefit’ financially from independent taxation, the Comptroller added.

Compensation was not factored into the original proposition, Deputy Pinel admitted, but emerged as an issue in subsequent consultation. It would be ‘bespoke’, she said, ‘catering for individual circumstances’.

And the move to independent taxation would also be phased, with voluntary opt-ins prior to the hard 2024 date.

Currently, married couples and civil partners are assessed together for tax and normally fill out one tax return per couple. Under the current law, the man is deemed responsible for the tax affairs of a married couple while, in a same-sex marriage or civil partnership, the responsibility falls to the older person. This duty includes filling out the form, getting the couple’s tax bill, and taking responsibility for paying the bill.

Deputy Pinel said the law they wanted to change was 100 years old and ‘completely unfair’.

‘It is completely unacceptable that that should be allowed to continue,’ she said, adding later: ‘The system is not fair in any way at the moment.’

Mr Summersgill also said: ‘The existing system is archaic and it is not compatible with international norms of human rights. It has to go.’

The move to independent taxation could also help to tackle domestic abuse in which a woman was having her finances controlled, the panel heard.

Deputy Steve Ahier said the panel had received a number of responses from women who had been subject to domestic abuse, ‘who have pointed out that financial coercion is a form of abuse facilitated in part by the current tax system’. He asked for assurances that, under independent taxation, married women subject to abuse would be able to claim child tax allowances.

In response, Mr Summersgill said one of the ‘great benefits’ of moving to independent taxation was ‘it should hopefully reduce the likelihood of that sort of circumstance arising’, with women in ‘entire control of their tax affairs’.

‘Independent taxation is another safeguard against women being coerced financially,’ he added.

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