Treasury and Resources
Ministerial Decision Report
2014 Budget proposition and Draft 2014 Budget Statement
- Purpose of Report
The purpose of this report is to enable the Minister for Treasury and Resources to lodge the 2014 Budget Proposition and the Draft 2014 Budget Statement.
- Background
The 2014 Budget Proposition and the Draft 2014 Budget Statement detail the proposed tax measures to be introduced.
- Proposals
The 2014 Budget Proposition is attached and asks the States to agree:
- the estimate of total taxation revenue
- the growth proposals for 2014
- the capital programme for 2014 for both non trading and trading departments
- the funding proposals for the major capital projects for hospital services and facilities and the provision of more and better housing stock.
The Draft 2014 Budget Statement details the proposed changes to income tax, goods and services tax, impôts duty, stamp duty and land transaction tax for 2014. A summary of the proposed measures is listed below:
Income Tax Proposals
Unless specifically stated, all changes come into effect for year of assessment 2014.
The Minister proposes the following.
Exemption thresholds
The income tax exemption thresholds for the year of assessment 2014 shall increased by 1.5% in line with the increase in inflation to June 2013.
Allowances
With the exception of the enhanced income tax exemption threshold for parents of children in higher education [see below], the allowances will remain at the same level as in 2013.
Decrease in the Income Tax Marginal rate
The marginal rate of tax shall be decreased from 27% to 26%.
Enhanced income tax exemption threshold for parents of children in higher education
The tax relief available to parents (taxed at the marginal rate) who have children over the age of 17 years that are in full-time higher education shall be increased by adding £3,000 per child to the parent’s income tax exemption threshold.
Remove the restriction to child allowance by reference to the child’s income
The current restriction in the relief based on the child’s earned income is removed so that any earned income of the child is not taken into account when calculating both the standard and higher child allowances.
Increase the age of entitlement for single, married persons and civil partners to the higher income tax exemption threshold
The age entitlement of 63 years is increased to 65 years with grandfathering provisions included for those taxpayers who are under 65 but currently in receipt of the higher exemption.
Income Tax Instalment System (ITIS) provisions – restrict credit to controlling directors
The Income Tax Law is amended to ensure the provision of a tax credit in circumstances where income tax deducted has not been paid over to the Comptroller no longer applies to controlling directors.
Create level playing field for oil importation and distribution companies – liable to tax at 20%
The Income Tax Law is amended to ensure that all profits arising from the importation and / or supply of oil are liable to tax at 20%.
The Income Tax Instalment System (ITIS) – Mandatory online filing
The Income Tax Law is amended to allow the Comptroller to introduce mandatory online filing for ITIS returns from employers.
Lump Sum Donations – revoke 3 year rule of residence prior to making Lump Sum Donation
The current 3 year rule which prevents new residents making donations to charities under the Lump Sum Donation provisions is revoked.
Allowing existing 1(1)(k) residents to be taxed under the post July 2011 income tax provisions that relate to 1(1)(k)s
Allowing some taxpayers who were granted a housing consent under regulation 1(1)(k) of the Housing (General Provisions) (Jersey) Regulations 1970 to be taxed under the ‘new’ (post July 2011) income tax regime.
Strengthening the income tax law on tax relief for interest
An amendment to the interest relief rules that will give the Comptroller the power to limit the amount of interest that may be deducted where the interest incurred exceeds the amount that could reasonably be expected to be charged on a commercial basis.
Allowable deduction on account of social security contributions revised for self employed
The Income Tax Law is amended to accommodate the changes to the Social Security Law from 1 January 2012 regarding the introduction of Additional Class 2 contributions above the earnings ceiling.
Repeal of credit for electronic delivery of income tax return
Remove the entitlement to a £20 deduction from the amount of tax payable by an individual if they file their personal tax return online.
Changes to the company Distribution Rules
A number of minor changes to the Distribution Rules introduced in the 2013 Budget to ensure they are operating as intended. This includes measures to address the situation where a shareholder switches from the simplified basis of taxation to the calculated basis of taxation.
Goods and Services Tax Proposals
Definition of existing building – clarification and strengthening of existing policy
The introduction of a definition of the term “existing building” in the legislation to ensure that only the construction of new dwellings from the ground up will be eligible for the 0% rate and building services on existing residential property are subject to the 5% rate.
Input tax blocking order on white goods, carpets and similar goods supplied in zero rate dwellings
Introduce legislation to clarify the current GST policy and practice which requires developers and vendors of new dwellings zero- rate to accounts for GST on the sale of any “white goods”, carpets and other removable goods commonly supplied in new residential units.
Deregistration process
Introduce legislation to allow the Comptroller, taxpayers and their agents greater flexibility in agreeing the date from which GST deregistration should apply.
Align the GST treatment of imported goods with domestically sourced goods
Introduction legislation to align the treatment of goods that have been imported by a Customs approved importer with those that have been sourced in Jersey with a recovery of the GST to ensure that both categories of goods are considered when applying the provisions which exist to apply a GST charge when goods (e.g. cars) are taken to private use or when a business deregisters for GST.
Discretionary power to the Comptroller to allow input tax claims that would otherwise be capped at 3 years
Introduce legislation to give the Comptroller a limited discretionary power to allow, upon application, input claims that would otherwise be capped at 3 years.
Impôts Duty Proposals
Increase the duty on alcohol, tobacco, fuel and VED by the following:
- 11% increase in duty on a litre of spirits – £1.27 per litre.
- 5% increase in duty on a bottle of table wine – 7p per bottle.
- 5% increase in duty on a pint of weaker beer and cider (not exceeding 4.9% abv) – 2p per pint.
- 11% increase in duty on a pint of strong beer and cider (exceeding 4.9 abv) – 6p per pint.
- Increase on the duty on 20 king size cigarettes by 11% – 47p per packet of 20 cigarettes
- Increase on the duty on all fuels by 2% – 1p per litre
- Increase on all VED (Vehicle Emission Duty) bands by 5%
Stamp Duty and Land Transaction Tax Proposals
First time buyers
Continue the extension of the maximum threshold for first-time buyer relief from £400,000 to £450,000 until 31 December 2014.
Growth proposals for 2014
In the debate of the Medium Term Financial Plan (MTFP P69/2012) in November 2012, the States agreed an amendment by the Chief Minister to the proposals by the Corporate Services Scrutiny Panel for a central growth allocation in 2014 and 2015.
The amendment by the Chief Minister resulted from a review by Ministers of those growth bids, which could be held centrally and allocated in future years’ annual Budget.
The Council of Ministers is now proposing that the Allocation of Central Growth for 2014 of £2,210,000, and associated funding of £1,460,000 for 2015, be allocated to departments in line with the original allocation.
Capital Programme for 2014
The Medium Term Financial Plan (MTFP) set out the capital programme for each of the years 2013-2015 and the debate on the MTFP approved the capital programme, in total, for each of these years. The budget for each of these years will approve the detailed list of projects.
The total allocation approved for 2014 was £88,892,000.
The review of the proposed programme has identified a reduced cost for additional primary school accommodation. It is proposed that this variance is reallocated to accommodate an additional allocation to Transport and Technical Services for works at Green Street Car Park, Education Sports and Culture for work required to meet their Sports Strategy and an additional allocation for Fiscal Stimulus and Parish Projects.
More detail of individual projects can be found in the main body of this document, but, departmentally, the approximate allocations for 2014 are:
Chief Minister’s Department £1.04m
Education Sport and Culture £15.76m
Department of the Environment £0.65m
Heath and Social Services £14.73m
Home Affairs £1m
Transport and Technical Services £25.8m
Treasury and Resources £2.5m
Other Capital £5.2m
Social Housing Programme £22.2m
Major capital projects: Hospital, Housing and Liquid Waste.
The Island faces a need for major infrastructure investment in housing, hospital facilities and liquid waste infrastructure. This Report brings forward innovative and cost effective ways of funding these projects that will minimise the cost, maximise the use of existing resources and safeguard our Island for the long term.
- Recommendation
It is recommended that the Minister for Treasury and Resources approve the 2014 Budget Proposition and the Draft 2014 Budget Statement for lodging “au Greffe”.
- Reason for Decision
The 2014 Budget proposition and draft 2014 Budget Statement are to be lodged “au Greffe” 8 weeks prior to debate on 3 December 2013, as required by the Public Finances (Jersey) Law 2005.
- Resource Implications
The proposals within the Draft 2014 Budget Statement will be implemented without any increase to current approved staffing levels.
The financial implications of the Budget proposals in 2014 would be an increase to States revenues of £294,000 compared to the forecast from the 2013 Budget with the income tax measures which relate to the income tax year of assessment 2014 not impacting on States revenues until the financial year 2015.
PROPOSITION
DRAFT BUDGET STATEMENT 2014
THE STATES are asked to decide whether they are of opinion -
(a) to approve, in accordance with the provisions of Article 10(3)(a) of the Public Finances (Jersey) Law 2005, the estimate of income from taxation during 2014 of £639,513,000 as set out in summary Table A of the Budget Statement, with the sum to be raised through existing taxation measures and the proposed changes to income tax, Goods and Services Tax, Impôts duty, stamp duty and Land Transaction Tax for 2014 as set out in the Budget Statement;
(b) to approve, in accordance with the provisions of Articles 10(3)(c) and 11(3) of the Public Finances (Jersey) Law 2005 the appropriation of £2,210,000 in 2014 and £1,460,000 in 2015 from the amount appropriated to growth expenditure in the Medium Term Financial Plan 2013 to 2015 to a revenue head of expenditure for each States funded body as set in the recommended allocation of growth expenditure in Summary Table B.
(c) to approve, in accordance with the provisions of Article 10(3)(d) of the Public Finances (Jersey) Law 2005, a capital head of expenditure for each of the capital projects for States funded bodies to be started or continued in 2014 (other than States trading operations) as set out in the recommended programme of capital projects in Summary Table D totalling £88,892,000.
(d) to approve, in accordance with the provisions of Article 10(3)(e) of the Public Finances (Jersey) Law 2005, each of the capital projects that are scheduled to start during 2014 in the recommended programme of capital for each States trading operation, as set out in Summary Table E that require funds to be drawn from the trading funds in 2014.
(e) to agree –
(i) that, following the approval by the States on 16th May 2013 of the proposition “The Reform of Social Housing” (P.33/2013) and in accordance with the provisions of Articles 10(3)(b) and 21 of the Public Finances (Jersey) Law 2005, the States be authorised to borrow up to a maximum £250 million in 2014 for housing purposes and that, in accordance with the provisions of Article 10(3)(f) of the Public Finances (Jersey) Law 2005, the amount borrowed by the States be transferred from the consolidated fund to the Housing Development Fund;
(ii) in accordance with Article 3(3)(b) of the Public Finances (Jersey) Law 2005 that the purposes of the Housing Development Fund (“the Fund”) be varied to enable the further provision and development of housing in Jersey and that -–
(A) the Fund be permitted to lend money up to a maximum £250 million to Housing Trusts/Associations/Companies or bodies with the same purpose registered in Jersey in order that they can provide housing for islanders, on terms and conditions to be agreed, after consultation with the Minister for Housing, between the Minister for Treasury and Resources, and the aforementioned Housing Trusts/Associations/Companies;
(B) all administrative costs associated with the operation and maintenance of the activities of the Fund to be paid out of the Fund;
(C) the fund to be invested through the Common Investment Fund in accordance with its own published investment strategy.
and that subject to the sanction by Her Most Excellent Majesty in Council and the subsequent coming into force of new Articles 3(3)(aa) and 3(3)(ab) of the Public Finances (Amendment No. 4) (Jersey) Law 201-
(D) all money due to the Fund, including any loan repayments and interest due from Housing Trusts/Associations/Companies, be credited to the Fund;
(E) money credited to the Fund does not form part of the annual income of the States.
(f) to refer to their Act dated 5th December 2006 in which they approved a revised policy for the use of the Strategic Reserve Fund established under Article 4(1) of the Public Finances (Jersey) Law 2005 and agreed that the Fund should be a permanent reserve, where the capital value was only to be used in exceptional circumstances to insulate the Island’s economy from severe structural decline such as the sudden collapse of a major Island industry or from major natural disaster and to their Act dated 6th November 2009 in which they varied that policy and agreed that the Fund could be used if necessary, for the purposes of providing funding, up to a maximum £100 million to meet the States contribution to the Bank Depositors Compensation Scheme and/or to meet any temporary cash flow funding requirements of the Scheme established under the Banking Business (Depositors Compensation) (Jersey) Regulations 2010 and, in order to enable the creation of new hospital services as part of the proposals agreed by the States on 23rd October 2012 in adopting the proposition “Health and Social Services: a new way forward” (P.82/2012) –
to agree, as an exception to the approved policy for the use of the Fund, that the Fund may be used for the planning and creation of new hospital services in the Island, and to approve the transfer of an initial sum of £10.2 million from the Strategic Reserve Fund to the consolidated fund in 2014 so as to provide for these purposes, in accordance with the provisions of Article 4(3) and 10(3)(f) of the Public Finances (Jersey) Law 2005.
MINISTER FOR TREASURY AND RESOURCES
gov.je