MINISTERS have rejected calls to remove GST from food, arguing that any benefits from doing so would not hit Islanders’ pockets until 2024 – and that the loss in States revenue would need to be funded from elsewhere.
Next week, the States Assembly is due to debate a proposition from Reform Jersey Deputy Raluca Kovacs to scrap the 5% sales tax on food items in response to the cost-of-living crisis.
However, in official comments ahead of the debate, the Council of Ministers have said they will not be supporting the proposals and added that the measures agreed by the Assembly in the government’s mini-budget would do more to support struggling Islanders.
The Council of Ministers stated that while the proposition ‘appears attractive’, removing GST from food was ‘not the best measure to help people’ and would be ‘ineffective, complex and burdensome’.
Their comments continued: ‘This proposition has been described as a response to the cost-of-living crisis. However, due to the necessary implementation lead times, Islanders would not feel the benefit of zero-rating, if passed on by retailers, until 2024.
‘The recent mini-budget is currently delivering support to Islanders to weather the cost-of-living crisis, with further elements of the package of measures generating benefits in 2023.
‘It is also important to recognise that when GST was introduced, the States Assembly provided enduring compensation to Islanders for the impact on food prices through three mechanisms:
‘lImproved tax allowances, benefiting all taxpayers at the time of the introduction of GST;
‘lImproved income support payments, providing uplifts to income support components in line with the introduction of the 3%, and subsequent increase to 5%, standard rate of GST;
‘lThe creation of the GST Food Bonus, fully compensating households who did not pay tax and did not receive income support against the cost of GST on food.’
Ministers added that should the proposition be approved, the ‘shortfall of GST revenue would need to be made up through either expenditure savings or additional revenue’ and estimated that around £10m extra would need to be found.
The Council of Ministers said in their comments: ‘The proposition argues that zero-rating the supply of food in Jersey is affordable and would not materially affect public finances. The Council of Ministers does not share this view.
‘The Government Plan, as drafted, protects the stability and sustainability of public finances, but the challenging economic situation has meant that the forecast financial position in 2025 is very tight. A clear counterbalancing income stream (or expenditure reduction) would need to be found to fund this proposition.’
Deputy Kovacs’ proposition has received backing from one of the Island’s leading retailers. Shortly after it was lodged in September, Co-op chief executive Mark Cox spoke in favour of axing GST from food.
At the time, he said: ‘Removing GST from basic foods at a time of rising food prices would be welcomed and we would commit to ensuring the reduction was passed on to consumers.’
The next States sitting is due to begin on Tuesday.