Thursday, 26 March 2009

GST - let's not make it even worse.

I am one of the many who saw the introduction of a Goods and Services Tax, rolled up into retail prices like a Value added Tax, as an unsatisfactory answer to the consequences of the Zero-ten scheme for Jersey's corporate taxation.

On the other hand, I am not so convinced that, now we are stuck with it, that copying the mainland UK pattern of complex exemptions for all kinds of favoured items will not just make it even worse.

The level of the tax is driven by the need to raise a set amount of revenue from Jersey's ordinary households, spread evenly or fairly. Even and fair are seldom synonymous – the less resources one has, the less fair an even share of the burden feels, while conversely, those who can support more than others tend to see being obliged to do so as an injustice against them. But, one way or another, the taxmen will have calculated the average amount that they need to raise from each of us. As they need to take that tax, it makes little difference to the bottom line whether they take a little for all that we buy, or bigger chunks for just some of it. Possibly the latter opens a theoretical opportunity to avoid GST altogether, by a very austere lifestyle with not even the slightest luxury, but in practice the losses will have to be recouped by piling all the more tax on the items that remain within the net. And, not just to compensate for the loss of tax on the “basics”, but even more to cover for the depressed demand for more expensive luxuries. So, the standard of living for pensioners and others on very low incomes will not be appreciably better. It makes no odds whether one has no beer or ciggie money left after buying taxed food or just not enough to pay the new prices after buying untaxed food.

What the UK model does bring, though is unwelcome confusion and unfairness. A notorious bone of contention is trying to define the nebulous boundary between untaxed food and taxed confectionery, but in general arbitrary definitions and limits for anything are a raw deal for those whose products are stranded just on the wrong side. Do we really need to hire a couple of civil servants to pick through the UK precedents and choose which ones Jersey should follow, and which it should not, for the sake of keeping Jersey different? The latter is clearly a big issue with GST, or else they could have enabled everyone to get off-the-shelf VAT systems by adopting it lock, stock and barrel in the first place.

Keeping GST broad and light does make us all taxpayers, maybe no bad thing in this age of low levels of civic engagement, but it also means only those of the most extravagant habits need pay much. The fewer exemptions there are, the fewer injustices are generated by them. For instance, I do not see why fuel for luxury motor cruisers is less deserving of taxation than the fuel for the car I commute to work in. The more such exemptions GST becomes peppered with, the more it will become unfair.

1 comment:

TonyTheProf said...

I have changed my mind (and made it public a few months ago on my blog) on GST exemptions from food, but I still think that an exemption on electricity would be good because (a) electricity has risen 24% this year (b) it would not involve any cost, any manpower, any fiddling with what can and cannot be exempted (c) there is one supplier (d) it has wiped out the thresholds increase of John le Fondre last year introduced instead of exemptions.

I respect politicians like Sean Power or Sarah Ferguson who disagree on exemptions and have always been honest and upfront about this, so that when you voted for them, you knew what you got, but people who said in their manifesto - like Ann Dupre - one thing, and then rapidly changed their mind after being elected - are betraying the people who elected her. It is that fundamental dishonesty which annoys me, and is one of the core reasons for people not voting. Why should they, when someone is going to say something to get elected, and then renege on that. Ian le Marquand, at least, was true to his manifesto.