GST Exclusions for food – some facts and potential consequences if approved
Stakeholder
1. States of Jersey –
Treasury
2. General Public Consumers
3. States of Jersey - Tax
Administration
4. Business Community
5. External experts
6. Consumers – the less well
off – low income groups
7. Consumers - the better off
– higher income groups
8. Treasury - voluntary
compliance
9. Taxes office – taxpayer
errors
10. Customs – importers’
errors
11. What do other countries
do?
Likely Impact
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Comment
States of Jersey will lose revenue - this will
have to be made up from elsewhere.
Possible increase in the rate of GST [5% to
6%].
Retail prices could be reduced by the GST
content (3% rate - 2.9p in £1.00). In an
open market economy this is not as easy
as it seems and is not a forgone
conclusion.
Revenue departments (Taxes Office /
Customs) will require more staff to
administer a much more complicated
system. The cost of administration will go
up.
The tax system will become much more
complicated – bigger businesses may cope
but compliance costs for most will go up.
It would mark the end of the broad based /
low rate / simple system in Jersey (as
recommended by HMR&C and Fiscal
Policy Panel).
Vulnerable low income groups will lose in
terms of income support – less ability to
control their own levels of consumption tax.
The more you earn - the more you spend and the more you will gain from exclusions
for food.
More revenue will be lost than just the loss
of GST from taxing fewer goods - because
a more complicated system means fewer
GST payers will comply fully straight away,
as they do now.
Taxpayers do make mistakes (deliberate
and genuine) – scope for liability errors
significantly increased.
Importers currently do not have a problem
in identifying mixed liability goods. They will
have to in the future. Potential to misdescribe goods for the first time.
A mixed picture – EU member states must
have VAT - food must be taxed (low rate
>5% can be used) – UK and Ireland are
allowed to zero rate food (and other items)
under “transitional” arrangements.