Food to be included if 5% GST is approved

Food would be included in a 5% goods and services tax (GST), if the States Assembly approves the preferred Policy and Resources' (P&R) option.

In a policy letter, Guernsey's top committee said businesses had made clear that a blanket levy was preferred for GST in order to keep implementation costs low.

However, P&R has also included an alternative higher rate of 6%, with food excluded, in its proposals.

Treasury lead Deputy Gavin St Pier said: "The detailed analysis we have undertaken, shows that zero rating food, while having a higher rate, 6%, of GST on all other goods and services, does not in fact result in lower overall costs for low-income households."

P&R set up a sub-committee to work on alternative revenue raising options, which is expected to be published by the end of March. St Pier said a States vote would be held once that work had been completed.

"As part of the preparatory work taking place, we need the States to decide some of the detail of what that package of measures includes so that it could be introduced without further delay, in early 2028, if the assembly decides to include it as part of the final proposals on tax reform," he said.

"P&R is in no way pre-judging either our final recommendation to the assembly, or its decision."

The package which will be debated, known as GST plus, includes cuts to the rates of personal income tax, increasing social security allowances and a rise to pensions and benefits.

The committee also wants to introduce "legal protections" to stop future governments raising the tax "easily".

These include:

• Obligations to raise all other protections for income in the event of future proposals to increase the rate. This includes further cuts to income tax thresholds, increases to social security allowances and a jump in benefits and pensions.
• Requiring a "super majority" of two thirds of deputies to approve any increase.

"We know that one of the biggest fears following the introduction of any consumption tax is that it is too easy for governments to just keep increasing it," St Pier said.

"This was a major concern for the committee and we have also given a lot of thought to building in protections against this."

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