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Reform Jersey’s leader is making a fresh bid to do away with the island’s ‘20 means 20’ tax with a new system he claims could help “tens of thousands of islanders” with the cost-of-living crisis – and potentially provide a £11.5m boost to the public purse.
Under Deputy Sam Mézec’s proposals, all islanders would pay under the Marginal Relief system – whose basic rate would be reduced from 26% to 25% – by 2025.
That plan – lodged as an amendment to Ministers' spending proposals – is due to be debated next month.
But why the push to change the system and which taxpayers would be left better or worse off? Express took a closer look…
Jersey’s tax system is set up so that the maximum rate of tax anyone can pay is 20%.
As a way of helping islanders on low incomes, there is an ‘exemption threshold’ – so islanders whose income falls below this don’t have to pay income tax. This changes each year, set in Ministers’ budget plans.
Anyone eligible for paying tax will have their bill determined based on the calculation of two potential rates: 20% with a few allowances or 26% with more allowances applied.
Islanders will pay whichever results in the lower calculation.
In a report outlining his proposal, Deputy Mézec explained that tax changes to “put all taxpayers on a more equal basis” were a key part of Reform Jersey’s manifesto.
Pictured: Deputy Sam Mézec is the leader of Reform Jersey.
The idea of reducing 26% to 25% would provide a tax cut for middle earners, while higher earners would contribute more.
Reform says the proposals – which they developed with “objective advice and financial analyses” from Revenue Jersey officials – would see “the majority of taxpayers” left better off.
According to Deputy Mézec, the “vast majority of taxpayers are either better off or no worse” under the proposal.
People who currently pay a “negligible amount” under the current system will pay “nothing” – with Revenue Jersey estimating this to be around 50 people.
“Almost all” of those who pay an effective rate between 1% and 19% will see their tax bill go down.
Around 2,050 islanders who currently pay the standard rate of 20% will say their tax liability go down because they will become eligible for allowances they don’t currently have access to.
Pictured: “Almost all” of those who pay an effective rate between 1% and 19% will see their tax bill go down.
However, around 4,750 taxpayers at the top earning bracket would see their tax bills rise. Though the maximum rise would be from 20% to 25%, Deputy Mézec said that “most of these will only have minor increases”.
A single person with no children, mortgage or anything else that would qualify them for a special allowance, would not see their tax go up unless they were earning around £100,000 a year, the Deputy said.
A married pensioner couple, meanwhile, would not see their liability increase until they are earning around £200,000 a year.
The Treasury has estimated that an extra £11.5m would be raised based on the most up to date data they possess, although this may differ by 2025 when, if approved, the change would come into effect.
Wealthy immigrants who are taxed under the high-value residency scheme, which is currently being reviewed by Ministers, do not fall into this plan.
This, Deputy Mézec says, is because their arrangements are already separate and would have to be tweaked separately.
Last year, Deputy Mézec also proposed ending ‘20 means 20’.
However, his proposal – lodged as an amendment to the Government Plan – was not supported by a majority of States Members.
This latest proposal – also a Government Plan amendment – will be debated in December.
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