Expert slams independent taxation proposals as “discriminatory”

Friday 27 August 2021

A local tax expert has criticised the phased implementation of independent taxation as “discriminatory”, noting that identical taxpayers could be facing “significantly differing” tax bills from 2022.

John Shenton, Tax Director at Grant Thornton, shared his concerns with the Corporate Services Panel, which is currently reviewing the independent taxation proposals brought forward by the Treasury Minister, Deputy Susie Pinel.

While he is in favour of independent taxation, which he described as “long overdue”, the tax specialist said in a letter to the Panel that he could only be fully supportive if the proposals created a “level playing field” to allow all islanders to benefit from the changes.

However, he said the decision to introduce independent taxation in three phases would favour some tax payers and disadvantage others. 

Pictured: John Shenton is Tax Director at Grant Thornton

It is proposed that arrivals to the island from January 2022 will automatically be registered for independent taxation.  There will be no change for those who are taxed as a single person.

A pilot scheme is also being planned for those couples who are already separately assessed for tax purposes to choose to be moved to independent taxation from the start of next year.

There will be a voluntary opt-in period from 2023 but, at some point in the future which is yet to be determined, all married couples and civil partners will have to move to independent taxation.

In his letter, Mr Shenton said he was disappointed that the proposals would mean two sets of identical taxpayers could face significantly differing tax bills from 2022 and failed to deliver independent taxation for those who are currently disadvantaged from 2022, contrary to what the Minister has previously said.

“This proposition seems to be asking c4,000 taxpayers to continue to pay for Government inefficiencies and pay greater amounts of tax than identical taxpayers,” he wrote.

Pictured: Mr Shenton said some couples would be disadvantaged by the phased introduction.

Mr Shenton he couldn’t understand why the introduction of independent taxation had been delayed with no transitional provisions for taxpayers who would be affected by it.

He also voiced concerns about the lack of information over the second and third phases of the introduction, including their timeline. He added there was no guarantee for disadvantaged taxpayers that they wouldn’t be worse off for many years as there was “no firm suggestion / proposition / legislation” as to when the later phases will be introduced.

He noted that the Comptroller of Revenue, Richard Summersgill, had previously stated that opting for independent taxation would bring no tax benefits, a position which was changed by the latest proposal.

He suggested the only reason for continuing to delay the introduction of independent taxation for the disadvantaged taxpayers who cannot choose independent taxation from 2022, seemed to be for “administrative convenience (or cash)” as “a smaller group will form a pilot study group to test communications and support and gather customer feedback to inform phases two and three.” 

“As the amount of potentially disadvantaged taxpayers’ number c4,000 I would suggest that an extension of the target group to include these taxpayers would not be overly burdensome given the total amount of taxpayers,” he wrote. “A lower earning second earner with two children and an average mortgage could be better off by over £4.5k – this is not an insignificant sum. This is a significant disadvantage.”

Pictured: The tax expert said that with all vacancies now filled at Revenue Jersey, Scrutiny should insist the Treasury Minister keeps her promise to introduce “independent taxation for the 2022 year of assessment.

Mr Shenton said islanders should be given the opportunity to choose to be taxed independently for the 2022 assessments, which will not be raised until 2023, as it would provide a level playing field for the changes. He questioned why this wouldn’t be possible given the implementation would be 18 months away. 

“I am surprised that given the size of government, the States of Jersey do not seem to have the technical resources to run a pilot study without creating tax advantages / disadvantages? Should not a pilot study have already been undertaken in-house before this proposition was lodged?,” Mr Shenton wrote.

He went on to say that, with all vacancies now filled at Revenue Jersey, the Panel should insist the Treasury Minister keeps her promise to introduce “independent taxation for the 2022 year of assessment rather than “move the goalposts at the eleventh hour to create a regime that openly discriminates against two identical taxpayers”.

The tax expert also noted that the way the law was drafted would not guarantee full independence and had not fully considered allowances and reliefs.

“I fully understand from an operational point of view it may be advantageous to split this into smaller bite size pieces (previous experience clearly shows us that) but the discriminatory aspect of the proposed changes is more difficult to understand especially given all the relevant assurances over the last few years,” he concluded his letter. “By lodging this proposition I am not sure that the Government meets their own stated aims of taxation in Jersey being low, broad, simple and fair. These proposals are clearly not broad or fair.”

The publication of his comments coincided with a Scrutiny hearing this week in which the Treasury Minister, Deputy Susie Pinel, confirmed plans to introduce a compensation scheme to ensure couples on lower incomes are not worse off as a result of the independent taxation change. With some better-off couples due to benefit from the change, Scrutineers expressed concerns yesterday that the Treasury will lose £4m a year.

Deputy Pinel's proposition will be debated next month in the States Assembly.

Early last year, States Members voted nearly unanimously on “long overdue” changes to give both partners equal rights and responsibilities over their tax affairs.

Read John Shenton's full letter HERE.