HAVING a broad 5% rate of GST is simpler to administer for businesses and government, while removing the tax from food is unlikely to lead to “observable price reductions”, ministers have said.
A petition calling for the charge to be taken off food passed 1,000 signatures prompting a ministerial response.
The topic has been debated several times by the States Assembly since the introduction of GST in 2008, most recently three years ago when Deputy Raluca Kovacs’s proposition to remove it from food was defeated by 28 votes to 17.
In their official response to the latest petition, ministers have confirmed that there is no intention to bring forward legislation to remove the sales tax from food.
The response read: “Maintaining a broad base of taxation with few exemptions is the key to preserving Jersey’s low rate of GST, one of the lowest in the world. It is also simpler to administer for businesses and government.
“Jersey’s low rate of GST on all goods and services, combined with generous personal income tax allowance and income-related benefits, keeps money in Islanders’ pockets and leaves spending choices to them. To balance the books and so maintain public services, lowering the GST rate on foodstuffs could mean raising the rate on other goods and services. Analysis undertaken by Treasury indicates that the GST rate on non-food goods and on services would need to be raised by roughly one percentage point (to 6%) to recover the revenue lost from removing GST on food.”
The response admitted that some ministers were supportive of axing GST but added that Treasury Minister Elaine Millar believes that the “best way to help lower-income households manage the cost of living is through direct support” such as income support and the Community Costs Bonus.
While some Ministers have expressed support for the removal of GST from food, the Minister for Treasury and Resources believes that a broad-based system remains the fairest and most sustainable approach.
“Evidence from targeted exemptions in other countries, most notably the UK, indicates that retailers do not always pass on reduced prices to the consumer. Given the wide variations in the prices of basic foodstuffs highlighted on the Jersey Consumer Council’s website, it is unlikely that removing GST from food in Jersey will lead to observable price reductions,” the response continued.
“GST exemptions will create administration costs for businesses, particularly smaller businesses, which makes price reductions less probable. The government would also face a material increase in administrative costs from operating a multi-rate GST regime.”
