Food Costs (Offset of Average GST) Bonus (Jersey) Regulations 200-
Introduction.
In agreeing to keep the Goods and Services Tax (GST) as a simple, broad-based tax, which is cost effective to administer, the States guaranteed the introduction of GST at a low rate.
Whilst urging States Members to reject the proposal to zero-rate food, books, newspapers and magazines, the Minister for Treasury & Resources proposed alternative measures which would more effectively protect low income groups completely from GST and lessen the total tax burden on those on low to mid incomes, whilst at the same time not adding bureaucratic complexity to the GST scheme, the administrative costs of which would be a burden upon business and the taxpayer.
The first of these measures was to increase by a full 3% the rates of the components of Income Support which covered costs which would be liable to GST, thereby protecting those on Income Support completely from the introduction of GST. These new rates came into effect on 1 May 2008, ahead of the introduction of GST.
Secondly, Income Tax exemptions were increased by 6.5% in the Budget for 2008, instead of the 3% originally intended. This additional 3.5% reduced the tax burden of low to middle income families by approximately three times more than the zero-rating of food, newspapers, books and magazines, would have done.
However there is a group of families who neither pay Income Tax nor are in receipt of Income Support and the Ministers of Treasury and Resources and Social Security committed to developing a scheme which would benefit those families who would not be better off as a result of the two measures above.
That Scheme is proposed in these triennial regulations and is aimed at providing a Bonus to those families who neither pay Income Tax nor receive Income Support, set a rate which typifies the average effect that the introduction of GST would have had on their food costs.
Eligibility
Eligibility for the bonus is to be determined on a household basis, consistent with the definitions within the Income Support scheme
Essentially, a household comprises a single adult or two adults living together as a couple together with any dependent children.
An eligible household must satisfy all of the following conditions:
- At least one adult in the household has been resident in Jersey for five years immediately preceding the date of the application; and
- No adult member of the household is liable to pay Income Tax in respect of the previous calendar year; and
- The household is not entitled to receive income support during the 7 days preceding the date of the application OR the household receives a transition payment which phases out over a number of years the level of benefits to that which they received under the legacy benefit schemes, which were replaced by Income Support.
This last condition requires some explanation, as whilst a family may be in receipt of a transition payment, such payments have not been uprated to counter the effects of GST and so any family whose Income Support payment continues to be topped up by a transition payment, will not benefit from the increase in the rate of Income Support, until their Income Support entitlement exceeds their legacy benefit entitlement.
Value of Bonus
The value of the bonus is proposed in the first year, based upon the average household food expenditure of an average second quintile family as evidenced by the Household Expenditure Survey.
The full first year effect of GST on that average household expenditure is calculated at £75, and thereby, as GST was introduced from May, the bonus in 2008 will be set at £50 per family.
The rate of bonus for 2009 will be set at £75 uprated by the rise in food costs in the 12 months from June 2008, and further uprated for 2010. Thereafter further triennial regulations will have to be laid before the States.
Application for Bonus
The Social Security Department will administer this bonus scheme and will send out application forms to all those families in receipt of a transition payment, explaining the scheme and inviting an application should the household meet the residence condition and not be liable to pay Income Tax.
In addition a local media campaign will be targeted specifically at those families who do not have a tax liability, but are not in receipt of any Income Support payments.
As tax assessments will have been issued by September annually, all eligible households will be able to make an application between 1 October and 15th December each year.
Applications will be as straightforward as possible, requiring the minimum of information necessary to ensure entitlement as well as evidence of a nil tax assessment for all adults in the household.
Financial and manpower implications
The Social Security and Income Tax Departments have between them estimated the number of families entitled to claim the benefit.
Based upon the known numbers of households in receipt of the benefits and estimates of the numbers of households without tax liabilities, there may be up to 6,000 households which could be eligible to apply for this bonus.
The annual administration cost is estimated to be 2 additional fte for 4 months of the year at a cost of £20,000
The implementation costs of establishing the scheme and developments to the Social Security Information Systems are estimated at £20,000
£267,000 has been made available for this scheme in 2008, from carryforwards in 2007 and the proposed Social Security cash limit for 2009 includes £400,000 for this benefit.
Assuming a take up of 5,000 households, the estimated cost of this scheme, including implementation and administration, will be £290,000 in 2008 and £395,000 in 2009. Any overrun in 2008 would be funded from within agreed cash limits.
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