Tax pay change ‘could take money out of the economy’

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But the Treasury Minister has responded to say that the department’s proposals had been ‘misunderstood’ and pointed out that there could be a financial discount for those who pay their bills quickly.

At the end of last week, Deputy Susie Pinel announced plans to shift the 45,000 Jersey residents paying tax on a prior-year basis to a current-year setup, arguing that the move would help Islanders whose income had dropped this year due to the Covid-19 outbreak.

For those whose payment regime is to be changed, their 2019 liabilities would be suspended until 2023 and a consultation is due to be launched to discuss how the outstanding amounts will eventually be paid back, with a view to doing this over a five-to-ten-year period.

But tax professionals Garry Bell and John Shenton have both spoken out against the plans, claiming many Islanders would have to pay another year’s worth of tax in the near future.

Mr Bell, head of tax at PKF BBA, said that the move would effectively mean many taxpayers would end up paying tax sooner than they otherwise would.

‘It feels like government are using this issue as an excuse to raise some extra revenue,’ he said. ‘I think affected taxpayers should actually expect to see some sort of discount applied to the extra tax they pay and then the ability to spread this out, because they are being asked to pay tax sooner.

‘In effect, £1,000 is worth more today than it is in 20 years’ time, so if you want me to pay £1,000 today rather than 20 years from now, you should give me some sort of discount for that.

‘I am concerned because this could essentially take money out of the economy when introduced.’

Mr Shenton, head of tax at Grant Thornton, said that the move was akin to the government receiving an interest-free loan from the taxpayer.

‘Sixty-one per cent of taxpayers are being asked to accelerate their previously agreed tax payments and pay more than one year’s tax liability over a yet undefined period,’ he said.

‘The suggestions range from a double payment in a single year through to five years (120% each year) or 110% over ten years.

‘I am not sure how many taxpayers can afford to up their tax payments by these amounts. However, not for the first time, one cannot fully consider the plans as the proposal being launched is incomplete.’

He added that he believed that if Islanders were asked to pay their tax sooner, they should receive some ‘recompense’ for doing so.

In response to the criticisms, Deputy Pinel said that there was a ‘misunderstanding’ about what her department was trying achieve and that those who paid off their 2019 debt as a lump sum in 2023 could receive a discount.

‘The whole reason we are doing this is so that people don’t fret about being on half their salary this year and still having to pay tax on their 2019 salary, which would have been higher,’ she said.

‘The 2019 debt will be frozen and going forward to 2023 is the first time people will have to start considering paying it back.

‘If we get to 2023 and they can pay it in one go, what we are considering, and this is part of the survey going out this week, is asking if they would be interested in a percentage reduction if you can pay it off in one go.

‘Alternatively, if they would struggle, then they should speak to the Tax Department. For the first five years our indication is that there would probably be no interest on the repayments.’

Yesterday former Senator Ben Shenton, John Shenton’s brother, lodged a petition calling for the 2019 tax year to be written off for all Islanders who might be moved to a current-year-payment basis.

‘When this amendment was made in Guernsey the prior year’s tax was written off,’ the petition report says.

‘With many people struggling under the current pandemic the government proposal is unjust.’

The petition had received more than 100 signatures at the time of writing.

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