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 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.