27 March 2017
The Treasury and Resources Minister has issued the following statement:
There have been a number of changes to Jersey’s personal tax and contributions over the last decade, and we have conducted a review to analyse their impact on different households and incomes.
I hope this detailed data will provide a common understanding of the way our tax system operates to inform future policy decisions.
Impact of income tax changes
The main changes in personal income taxation since 2006 have been 20 means 20 (which removed allowances for standard rate taxpayers), increased exemption thresholds for marginal tax payers, increased child allowances, and a reduction in the marginal tax rate.
Together these changes have meant that in 2015:
- households on lower incomes pay less income tax than would otherwise have been the case
- higher income households pay more income tax than would otherwise have been the case
The sum total of these changes has made our personal income tax system more progressive than it was in 2006, with more generous allowances supporting families with pre-school child care costs and children at university.
GST
GST is paid by all islanders at every income level. Lower income households pay a higher proportion of their income in GST than higher income households, but some low income households were compensated for the introduction of GST with a new benefit and increased income support payments.
People receiving income support were compensated through increases in income support components and all marginal rate taxpayers benefited from higher tax-free income thresholds.
The Food Costs Bonus is paid to households that are not eligible for income support but do not pay income tax.
All tax and contribution changes
The picture when all the key tax and contribution changes are considered is consistent across all the households examined in the report.
That is, in 2015:
- Higher income households pay more in tax and contributions that would have been the case if taxes and contributions had remained the same as in 2006
- Lower income households have been affected by the introduction of GST – but increases in income support components and a new food costs bonus were designed to help compensate these households
- For some marginal rate taxpayers the reduction in the marginal rate and increase in exemption thresholds has offset the impact of GST, long-term care and the rise in the standard earnings limit for social security contributions
Zero-ten
Before introducing zero-ten, Jersey’s corporate tax regime discriminated in favour of companies owned by non-residents. The EU considered this discrimination “harmful” and Jersey agreed to replace it with a non-discriminatory regime. The zero-ten regime taxes companies the same regardless of whether their owners are resident in Jersey or elsewhere.
The Island planned for the introduction of zero-ten; raising income by introducing GST and removing allowances from standard rate taxpayers. As a result a higher proportion of Jersey’s income has come from personal taxpayers since 2008, but zero-ten has maintained a successful, competitive economy and secured employment for islanders throughout the most serious global downturn since the 1930s.
It has protected the 13,000 jobs in the finance industry and the income we receive by taxing the salaries of those employees. The finance industry also contributes around £70 million per year in corporate tax and £10 million in ISE fees. This is a major contribution to funding our public services.
Taxpayer numbers
I would like to clarify a misapprehension about the number of taxpayers in Jersey. Taxes Office data shows that the number of people issued with a tax return has been around 60,000 for at least the past decade. Latest figures show there were 61,100 taxpayer households in 2008 and 61,500 in 2015. That amounts to an increase of 400 – not a drop of 10,000.
The population has risen during that time, but exemption thresholds have risen which means more people on low incomes are exempt from paying income tax.
And we must remember that the term “taxpayer” can refer to a single person, a married couple or a couple in a civil partnership. The Taxes Office does not send tax returns to groups of people like children and pensioners on fixed low incomes.
For these reasons the number of “taxpayers” does not equal the number of residents.
Further work
This exercise in data gathering is the first phase of our review. Now we plan to look at how the personal income tax system could be improved. We will give specific consideration to the implementation of independent taxation or alternatively the equal taxation of couples. A consultation will be published later this year.
A consultation is being launched this week on proposals for a new system of fixed financial penalties aimed at encouraging individuals and businesses to submit accurate, timely tax information and to make payments on time.
Review of personal tax (stage 1) on States Assembly website (1.89mb)
Further information
Work planned or underway:
- Economics Unit report on impact of migration – to support development of population policy
- review of case for a ‘Tesco tax’
- Tax Policy Unit to report on feasibility of bringing more financial businesses into positive corporate tax rates
- tax gap analysis
- modernising revenue collection
Statistics on Jersey’s income tax system
- around 30% of households pay no income tax due to Jersey’s generous tax-free exemption allowances
- single person’s tax-free allowance in 2017 is £14,550
- married couple’s is £23,350
- average effective rate paid by taxpayers is 12%
- the top 10% of taxpayers contributed 45% of personal tax in 2014; and 42% in 2009
- the top 40% of taxpayers contribute 81% of total personal tax revenues
- the bottom 40% contribute 8%
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