02 June 2011

GST goes to 5% - including on bread, milk and vegetables (not to mention books and nappies)

The last State's sitting saw the latest debate on whether or not the island's government should apply the 5% goods and services tax to food, drink and domestic energy. Compelling arguments were given both ways, and even those who thought they knew firmly how they were going to vote were to be found wavering when emotive arguments about the immorality of taxing life's essentials were brought out on one hand, and equally compelling keep it simple arguments were brought out on the other.

For a moment, I found myself waivering too. Was it not true that little real benefit would be derived if this tax were removed from foodstuff and domestic energy? The States was already doing there bit for looking after the poor with the GST bonus, which goes to those who are not on benefits, but who also don't earn enough to pay tax. Meanwhile, tax thresholds had been adjusted to allow more disposable income for people, to allow for the increase in GST, and for those right at the bottom of the income ladder, Income Support had been adjusted to take note of the increase in GST.

This had to make more sense than having a system of exemptions, after all, the GST earned on these commodities was being redistributed to the 'poor and needy'. 

These arguments were not enough to convince 22 States Members, including myself - the only St Brelade representative to vote against putting GST on food and domestic fuel costs.

Rebranding GST
What clinched it for me was the fact that the whole 'redistribution' argument (as used here) is fundamentally flawed. There has been an attempt over recent years to rebrand GST from a 'nasty tax' that disproportionately affect those least able to pay (a 'regressive' tax) into what the Assistant Minister now calls a 'mildy progressive' tax. This is all the more remarkable considering that only a year ago, when taxation went out to 'consultation' (Jersey style), the Minister himself had labelled it 'slightly regressive.' It seems that the meaning of words can be fluid, to suit the circumstances.

So, returning to the the point, this form of redistribution is flawed, because it is not like the so-called Robin Hood tax, which targets capital and those most able to pay, rather, the GST form of re-distribution is very much from the middle/lower-middle to the 'poor'. Whilst it is true that GST does catch 'everybody', it is those with limited income - or low disposable incomes - that have to pay disproportionately. Whilst some protection is given to low earners in the form of increased support and tweaked tax thresholds, those who are above the poverty line, but still struggling in real terms, in an increasingly costly island, are the ones who really miss out. It is they who will be most affected, whilst the real wealth (the hoarded capital, the land banks of the developers, and the large property portfolios of wealthy rentiers) is not challenged.

10 comments:

  1. Monty,

    The States was already doing their bit for looking after the poor with the GST bonus, which goes to those who are not on benefits but who also don't earn enough to pay tax.

    But to get it you have to have been on-island for 5 years. Low-paid seasonal staff get no help, nor do low-paid recent arrivals. Ergo poor people are still getting screwed.

    And as you rightly say, the point about GST savings is not the proportion of wage saved. It's the fact that a small increase in outgoings is enough to drag people down below the poverty line.

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  2. Anon, good point about those here under 5 years. It should be pointed out that the increase in the personal income tax exemptions thresholds will benefit everybody, but you are quite right to point out that the GST food refund, for those who do not earn enough to pay tax, but who earn too much to claim income support, can only be claimed by those who have been resident for less than 5 years.

    Indeed, have just looked on the States Hansard and on 18th January this year, I asked the Minister for Social Security the following question:

    'As the food costs or G.S.T. bonus was introduced as an alternative to removing G.S.T. from foodstuffs in an attempt to protect those on low incomes, will the Minister advise why residents who have been here less than 5 years are not eligible for this bonus?'

    (Note how the Minister is unhelpful in his response)

    Deputy I.J. Gorst of St. Clement (Minister for Social Security):

    'Residents who have been living in Jersey for less than 5 years do not qualify to receive the G.S.T. bonus because the qualifying conditions are linked to the 5-year residency requirement under the income support scheme.'

    5.13.1 Deputy M. Tadier:

    So, it is swings and roundabouts here. Clearly the next question has to be why is it then linked to the 5-year residency?

    Deputy I.J. Gorst:

    That was approved by this Assembly. The Food Costs Bonus (Jersey) Regulations 2008 and the conditions are in those regulations which this Assembly approved.
    [...]
    5.13.3 Deputy G.P. Southern:

    Is the Minister prepared to protect those who are not currently protected at the bottom end of the scale, i.e. those with less than 5 years’ residency? Will he bring something to the House to protect them?

    Deputy I.J. Gorst:

    I hope that this is remaining on the food cost bonus. I am not certain that it was there. Having said that, I should remind Members that when income support was brought in in 2008 the housing costs element of that support was reduced from 10 years to 5 years at that time. So, that is a relatively short period of time to see whether it is working. I personally do not believe that it should be reduced any lower and I have to say that I personally do not believe that this bonus should be introduced for those with less than 5 years residency. Having said that, they are decisions of this Assembly, this Assembly has rightly made those decisions and my department administers the law in line with those decisions.

    [12:15]

    5.13.4 Deputy M. Tadier:

    I am glad to hear the Minister supports not having G.S.T. on food but given that it has been the decision of the Assembly and given that what one tends to call the Le Fondré proposition or proposal was a sweetener to keep G.S.T. simple while at the same time keeping the most vulnerable protected, does he acknowledge that anyone in the Island who has not been here for 5 years, if G.S.T. had not been on food then they would benefit from that, they would benefit and not have to pay G.S.T. on food? Therefore those in that position are being unfairly penalised simply by a decision of this House and that, in fact, if one is to stand by the strategic planning of greater social inclusion, protecting those in need and greater equality in the Island, we should not be on a technicality penalising those members of Jersey society simply because they have not been here for the 5 years?

    Deputy I.J. Gorst:

    I would not say that those individuals were being penalised. I would say that this Assembly took the decision not to extend the benefit to those who have not been here for 5 years. However, I do understand that of course those individuals will be paying G.S.T. on their food.

    Taken from Hansard: http://www.statesassembly.gov.je/documents/hansard/32433-9425.htm

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  3. "Low disposable incomes" is the key. You may be above the income support level, but still paying high rental / mortgage costs, plus soaring fuel and food costs.

    It's exactly the same scenario as the idea of Deposits for elections - £500 is a large sum for people with smaller incomes, and a pittance for the really well off (otherwise they would never have contemplated it)

    The crazy situation is that if you buy a book from Waterstones online, you pay probably no p&p and certainly no GST (as with Amazon), but you pay GST on a book ordered at the counter at Waterstones here. Keep it simple!

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  4. The explanation for GST and its increase is simple really. The government is shifting the burden of taxation onto wages and salaries and off corporations and the wealthy.. There is a refusal to tax those who have most and are more able to pay and instead working people are expected to pay more. We have a government of the wealthy for the wealthy.

    The debate to zero rate food and domestic fuel was lost in the States, yet companies are already “zero rated” and not paying tax.

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  5. well said mr le cornu
    how true your words are. the states are over half are wealthy the over ones apart from 4/6 are spineless so nothing of reel good for jersey gets done.but when you get 40,000+ you doint give a f**k about gst or the little people the old just see come oct they will all start to care abit more for a few weeks just for the vote,s then its back to yes minister

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  6. Deputy you were going to discuss your colleagues who don't work during the vacations and related matters. Also, are you the one that was being examined by a States Committee?
    It is an important matter especially this year.

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  7. Anon,

    I don't recall saying I was going to discuss the issue of colleagues who don't work during vacations. That is a matter for them and the electorate. I can only speak for myself, but I certainly work throughout the year. As an unmarried politician, without a family, I am fortunate enough to have more flexibility when it comes to work and the hours I can put in. It is the case that the States as Assembly timetable mirrors that of the schools - so as last week was half-term, many States Members were not around. I was quite oblivious to it being a holiday, and managed a particularly productive week, drafting 2 propositions, and catching up with other correspondence and constituency issues.

    There is one way to test which States Members do not work during holiday periods, and that is to call them.

    This said, I should stand up for States Members only insofar as the fact that we too are workers, and we are entitled to time off like everyone else. However, it is difficult to do this, sometimes, without getting off the island completely.

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  8. Montfort.

    You said "I am fortunate enough to have more flexibility when it comes to work and the hours I can put in."

    Would you reply to the e-mail I sent you and your Scrutiny Panel asking any of you for an interview regarding the BDO/Alto Report?

    ReplyDelete
  9. Mr Voice,

    I did send an initial response to your email, but I wanted to wait until the Scrutiny Panelhad a chance to meet and discuss the comments of you and your fellow blogger (who have been doing great work by the way, on your continued efforts to expose inconsistencies and 'questionable' practice surrounding many aspects of operation rectangle, etc).

    That meeting took place yesterday, and our Officer should have sent you an email today, explaining what action the panel will be taken.

    In short, we agree the issues you have raised about the BDO Alto report and how it was seemingly leaked to a Daily Mail journalist, before it had even been finished, does need to be answered. As such, we have called for a public meeting with the Minister of Home Affairs to explain what happened.

    Information of date and venue of meeting will be published once this has been finalised.

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  10. Montfort.

    Have received the e-mail. I and the good people of Jersey will welcome your Panel's Review, the truth must be found.

    Naturally if I can be of any assistance please don't hesitate to ask. Just about all the "evidence" you require will be found on Rico Sorda's Blog.

    ReplyDelete