Accompanying Report for Social Security (Amendment No.21) (Jersey) Law
The Island faces a substantial increase in both the number and proportion of older residents over the next 30 years, with care costs predicted to more than double by 2044. In response to this issue, in July 2011 the States approved the Long-Term Care (Jersey) Law 2012. Details of the operation of the proposed scheme have now been set out in Proposition P.99/2013, which will be debated before this Law is considered.
The introduction of a Long-Term Care (LTC) scheme is designed to share long-term care costs more fairly across the community and the scheme will establish a clear and simple process to help individuals and their families understand the choices available and plan for the cost of long-term care. The proposed new scheme will provide financial support to Jersey residents who have significant long-term care needs and who are being cared for either in their own home or in a care home.
The report on the new Long-Term Care scheme, P.99, includes details of the contributions that will be levied on local residents and paid into the new LTC Fund. Section 3 of the P.99 report (pages 9-11) outlines the proposal to base LTC contribution liability on the Income Tax liability of an individual. This will include an allowance for marginal relief as in the Income Tax system but, unlike Income Tax, the maximum LTC contribution will be capped using the Social Security upper earnings limit (£152,232 in 2013).
Section 12 of the P. 99 report proposes a timetable for the phased introduction of these contributions:
- no contributions to be levied in 2014,
- an LTC rate of 0.5% in 2015 and
- an LTC rate of 1% starting from 1 January 2016
Most of the legal changes necessary to create the new LTC contribution are included in the Social Security (Amendment of Law No.6) (Jersey) Regulations, which will be debated before this proposition. However there are a number of issues that cannot be dealt with through the regulation making powers of the Social Security Law.
This amendment to primary legislation deals with two specific issues. It allows future changes to the long-term care contribution mechanism which is set out in Article 49B of the Income Tax Law to be amended by Regulations brought under the Social Security Law. It also introduces a surcharge mechanism for the long-term care contributions, in line with the existing surcharge mechanism imposed on late payments of income tax liability. The efficient joint collection of income tax liability and long-term care contribution liability is facilitated by a single approach in as many operational areas as possible.
Surcharge for late payment
Articles 2, 4, and 5 define the way in which an LTC surcharge will be calculated, collected, and paid into the long-term care fund. Article 2 confirms that any LTC surcharges collected will be paid into the long-term care fund. Article 4 explains when a surcharge is payable and how it is calculated. These rules are based on the rules for income tax surcharges. In particular, If the Comptroller of Income Tax waives the income tax surcharge then no LTC surcharge will be payable either. Article 5 makes changes to the Income Tax Law to allow the surcharge amounts to be collected and remitted to Social Security. Article 5(4) updates Schedule 1A. This schedule provides an updated version of each article of the Income Tax Law that includes references to long-term care contributions.
Future changes to long-term care contributions
Article 3 amends Article 50 of the Social Security Law. Article 50 creates regulation making powers across a wide range of social security areas. These are extended to include the power to impose surcharges in respect of late contributions and the power to make changes to Article 49B of the Income Tax Law. This is the article that provides for the collection of LTC contributions by the Comptroller of Income Tax. Any changes in these areas are still subject to approval by the States Assembly and Regulations can only be proposed by the Minister of Social Security.
Financial and manpower considerations
The development costs of the LTC scheme are being met through existing departmental budgets. Ongoing costs will be met through the LTC Fund itself. It is estimated that an additional 9.5 FTE will be required to administer the new scheme.
Human Rights
The notes on the human rights aspects of the draft Law in the appendix to this Report
Have been prepared by the Law Officers’ Department and are included for the
Information of States Members. They are not, and should not be taken as, legal advice.
APPENDIX
Human Rights Notes on the Draft Social Security (Amendment No. 21) (Jersey) Law 201- (“the draft Law”)
“Human Rights Notes on the draft Social Security (Amendment No.21) (Jersey) Law 201-
These Notes have been prepared in respect of the draft Social Security (Amendment No.21) (Jersey) Law 201- (the “draft Law”) by the Law Officers’ Department. They summarise the principal human rights issues arising from the contents of the draft Law and explain why, in the Law Officers’ opinion, the draft Law is compatible with the European Convention on Human Rights (“ECHR”).
These notes are included for the information of States Members. They are not, and should not be taken as, legal advice.
The draft Law engages two Articles of the ECHR:
- Article 1 of Protocol No.1 to the ECHR – Right to the peaceful enjoyment of property; and
- Article 6 of the ECHR– The right to a fair trial.
Article 1 of Protocol No.1 to the ECHR (“A1P1”)
A1P1 provides that:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
A1P1 will be engaged by the provisions contained in the draft Law, in particular Article 4, which provides that a person will have a liability to pay a Long-Term Care Fund Surcharge (“LTC Surcharge”) where they pay their long-term care contribution (“LTC Contribution”) late, i.e. after 6pm on the Friday following the first Monday in December in the year following the year in which the liability arose.
A1P1 is a qualified right, so if the interference with the right can be justified then no breach of A1P1 occurs. An interference with property is justified if it is in the public or general interest, it is in accordance with the law and is proportionate. Proportionality requires there to be a fair balance between the means employed and the public or general interest pursued. Measures taken to secure the payment of taxes or “contributions”, including compulsory contributions to State benefits are considered under the second paragraph of A1P1. It should be noted that a number of cases decided in Strasbourg have made it clear that States enjoy a very wide margin of appreciation in determining which laws it “deems necessary” in relation to the payment of taxes and other contributions.
A complete appraisal of the policy justification for the imposition of the LTC Surcharge was not available at the time of preparing these Notes. It is, however, presumed that the measure is intended to secure the timely payment of LTC Contributions. Moreover, it is noted that the regime in the draft Law reflects the existing regime for the imposition of surcharges under the Income Taxes (Jersey) Law 1961 (the “1961 Law”) to secure the timely payment of income tax. In this context it is unlikely that the imposition of the LTC Surcharge could be said not to strike a “fair balance” between the public interest in collecting LTC Contributions and the rights of the individuals, or indeed to be devoid of reasonable foundation, so that it might be successfully challenged on the basis that it is incompatible with A1P1.
Article 6 of the ECHR– The right to a fair trial
Case law of the European Court of Human Rights (“ECtHR”) has established that the right in Article 6 of the ECHR to a fair hearing applies exclusively to the determination of civil rights and obligations and to criminal charges. Tax matters governed by public law are regarded to be public in nature and considered to fall outside the scope of civil rights and obligations. It is unlikely that the obligation to make LTC contributions could be distinguished from this reasoning simply because the obligation has certain private law features.
It follows that Article 6 ECHR would only then apply to the decision to impose a surcharge if and to the extent that this would amount to the determination of a criminal charge. In order to determine whether a tax dispute involves a criminal charge it is necessary to look at three criteria -
- The legal classification of the offence in domestic law;
- The nature of the offence; and
- The degree of severity of the possible penalty.
It is considered unlikely that the decision to impose an LTC surcharge would engage the right in Article 6 ECHR in its criminal aspect. In particular, the draft Law contains no suggestion that the imposition of the LTC Surcharge arises from the commission of an offence and the surcharge itself is set at a low level, in keeping with the surcharge currently imposed under the 1961 Law. In conclusion, therefore, it is considered that the determination of liability to pay the LTC Surcharge does not engage Article 6 of the ECHR.
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