Accountancy Firm Recommends Channel Islands Emulate Isle of Man’s Tax Increase

A prominent accountancy firm suggests that the Channel Islands ought to emulate the Isle of Man’s approach to increasing income tax to enhance public funding. This recommendation coincides with proposals from Guernsey States to raise personal income tax from 20% to 22% for a two-year period, aiming to stabilize the jurisdiction’s public finances. Should these proposals be approved, Guernsey would mirror the Crown Dependency of the Isle of Man, which implemented a comparable 2% increase in the higher rate of personal income tax in April. This measure was intended to provide an additional £20m for health spending. Martin Katz, Director of Katz & Co, based in the Isle of Man, indicates that residents there have largely supported this change. Mr Katz stated: “It’s a matter of necessity – we live on islands that need to balance the books and so in one way or another the governments need to do that. While none of us like it, it’s necessary to raise more revenue otherwise we are going to go bust. We need to sustain our islands for the future and take a long term view.” Previously this year, Guernsey States disclosed an anticipated £24m shortfall in public revenue by the close of 2024, which has raised concerns regarding planned expenditures. Policy and Resources (P&R) stated that the proposed increase in personal tax would yield £34m annually and safeguard future capital investment initiatives. Concurrently, P&R President Lyndon Trott indicated that an increase of £1,100 to personal income tax thresholds would also safeguard the “lowest income households.” The Isle of Man’s Minister for Treasury, Hon Dr Alex Allinson, expressed optimism that Guernsey would adopt a similar measure, though he emphasized the importance of effective public communication regarding the allocation of these funds. He commented: “When you ask people whether they would be prepared to pay more tax from their income for essential services they say yes, but I still got a huge amount of opposition when it came in. All of our countries are having to make difficult, unpopular decisions so the thing is to communicate them properly to make sure they are the right decisions for the future prosperity, not just short term. Looking at the proposals that are coming forward I think Lyndon Trot is absolutely trying to do that.” In Jersey, a burgeoning movement advocating for comparable actions is also underway. Deputy Sam Mezec, Leader of the Reform Jersey Party, characterized Guernsey’s suggested 22% income tax increase as a “bold” initiative. He stated that his party has consistently backed income tax reform as a method to bolster the financing of public services. He remarked: “We do favour raising income tax for the highest earners in Jersey. The current system is decades old and it isn’t doing for public revenue what we need it to do.” He further mentioned that his party intends to observe Guernsey to gain insights from the tax increase, provided it proceeds. The States of Guernsey are scheduled to convene on 5 November to discuss these proposals, which have already encountered some resistance. Follow BBC Guernsey on X and Facebook. Send your story ideas to channel.islands@bbc.co.uk. Copyright 2024 BBC. All rights reserved. The BBC is not responsible for the content of external sites. Read about our approach to external linking.