GST the facts

Over 19,000 residents protested over the imposition of an extra £45 million taxation directed at ordinary working people and their families by Terry Le Sueur and his ministers. Some members of the States voted for exemptions for essentials such as food, medicines, children’s clothing and books in an attempt to make the tax less punitive. We failed. Terry Le Sueur and his ministers held firm. The only concession he granted when faced with defeat in the States was on medical services.

The Minister and his gang all said “But it’s only 3%, you will hardly notice it.” We suspected it would be more like 5% “to cover admin costs” and then a whole raft of hidden or deferred price rises appearing in the shops. That is what has happened. No amount of spin can disguise the evidence that people have witnessed in price rises today. Ministers still want to hide this tax. You can see the total price on the shelf, but you cannot see the tax on your receipts. Why not?

Why not? - because Terry and his gang do not want you to know. Some of them (the gang of 3 – Ozouf, Vibert and Routier) are up for election later this year. The JDA has done the sums and can tell you now how much it is costing you and you family. The results are shocking:

The average Jersey household pays at least £630. However, in 'Terry's Missing millions' below we show that it may actually be over £1,000 per year.

The full breakdown for family types is given here.

Family Type	Yearly GST	Family Type	Yearly GST
Couple	£ £700	Single pensioner	£ 260
Couple with children	£ 870	Pensioner couple	£ 600
Single Parent	£ 450
Single person	£ 330	All households (average)	£ 630

These figures are taken from the Household expenditure Survey (HES) 2004/5 and adjusted by 10.34% for inflation. Basic housing costs (rents, mortgages) which are not subject to GST are excluded.

These amounts are coming directly out of your pockets. They cannot be dismissed lightly as “only 3%”. It does not matter whether or not Terry can stick to his promise of “keeping the rate at 3% for the foreseeable future”, the costs to you will never go down, but continue to rise with inflation (stoked up in the short term by GST). Politically, in any case, the foreseeable future for Terry is the elections of 2011 at best. It will rise.

The “gang of 3” will protest that they have compensated some sections of society for GST. Is this compensation enough to cover these swingeing tax rises? Of course it is not that would mean taking significantly less tax from the people. For example, the effect of the exemption on medicines and medical services is only 10 p per week for the average family. No wonder Terry so was so easily persuaded!

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Terry Le Sueur's answer

My question to Terry Le Sueur of GST on families produced the answer given below. The figures they produce are unsurprisingly much lower than mine and until I have checked their methodology, I will not argue; that would be pointless at this stage. I am suspicious that all of figures in the categories of zero-rated, exempt, mixed and below threshold are artificially inflated to produce a lower result, but it is satisfying to note that our figures are “in the same ball park”.

Terry has now admitted that the average Jersey household will pay over £600 per year in extra tax.

For families with children this figure will be almost £900 extra.

Single pensioners will pay a fiver a week extra and pensioner couples an extra £10 a week.

Pensioners, in particular must be really pleased to be able to do their bit towards keeping the wheels of big finance turning by contributing extra tax from their hard-earned pensions.

These figures represent a massive blow to the living standards of Jersey families. They should be greeted at the ballot box in Autumn of this year with a resounding vote of NO to all those who voted for this nasty, regressive tax. See the hit list elsewhere, but make sure that you start by voting out Le Sueur’s “Gang of Three” ministers: Ozouf, Vibert and Routier.

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(Continued below the tables)

1240/5(3981)

WRITTEN QUESTION TO THE MINISTER FOR TREASURY AND RESOURCES BY

DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY 1st JULY 2008

Question

1. On 3rd June 2008 the Minister gave examples of total tax cuts, in monetary terms, over the three years 2007, 2008 and 2009, resulting from increases in exemption limits, which included the figure of £374 for a single person. Will he inform members whether this sum was the total tax reduction over the 3 year period or the tax reduction in each of those years?

Answer

The £374 is the total reduction in tax for the 3 years. The reduction, split between years, is £76 for the 2007 increase, £200 for the 2008 increase and £98 for the 2009 increase.

Question

2. Notwithstanding the impact of the increases in exemption limits, the Minister requested on 13th May 2008 in response to my question on average tax bills that I supply evidence for any calculation on GST bills. Does the Minister accept that:

a) a) the Household Expenditure Survey (HES) 2004/5, conducted in September 2005, provides the best evidence we have of spending patterns of, and hence GST bills on, Island residents?

b) b) The appropriate uprating for inflation from these figures is of 7.4% to March 2008?

c) c) Using these uprated figures provides a sound method for the assessment of the impact of GST, eliminating housing costs and other exempt items, on particular sectors of society?

d) d) Further, that the seven groups included in the analysis in Chapter 3 of HES are useful in measuring the impact of GST?

Answer

2(a) Yes; but the primary purpose of the Household Expenditure Survey is to provide information on household budgets as a basis for the calculation of the Retail Prices Index. It provides useful information on spending patterns for households that can be used to estimate the impact of GST on households. However any estimates prepared on this basis are subject to several caveats:

· · An estimated adjustment must be made in respect of those expenditure lines that comprise a mixture of taxable supplies and exempt supplies.

· · An estimated adjustment must be made to take into account those goods and services purchased from suppliers that are not GST registered.

· · The HES is based on a statistical sample adjusted to represent a notional “typical” household.

· · The survey was conducted in 2004/5 and spending patterns may have changed since that time.

In view of these caveats the estimation of the change in GST borne under different GST scenarios will, as a rule, be more accurate than the absolute figure for a household.

2(b) No; the States Statistics Unit maintain detailed Retail Prices Index data. It would be preferable to use their data rather than a single figure. The change in RPI between March 2005 (121.9) and March 2008 (134.5) is 10.3%.

2(c) Yes; subject to the caveats noted above this method can be used to provide estimates.

2(d) Answer as above.

Question

3. Does he then accept my figure of around £950 as the annual tax raised by GST from the average household in Jersey, according to the updated HES data above, and if not, what figure does he have?

Answer

No I do not accept the figure. Using detailed RPI indices and adjusting for the factors above the estimated figure for an average household is £626.

Question

4. Will he also produce figures based on this HES data for the 6 groups featured in this survey, namely single pensioners, pensioner couples, single parents, couples with and without children and single persons?

Answer

See spreadsheet attached.

Question

5. Will he also produce figures for the GST imposed on the lowest quintile (20%) of earners given in Chapter 2 of HES, and state whether it matches the £340 per annum of my calculations? Will he then examine the additional sums allocated to compensate those on Income Support for the impact of GST and state whether he can show that this compensation is adequate?

Answer

Using detailed RPI indices and adjusting for factors described above the estimated figure for the lowest quintile is £271 rather than the figure quoted.

The average sum allocated to compensate those on income support for GST is £318 per annum, which is more than the average cost of GST to households in the bottom quintile.

Scenario	1	Couple (both not pensioners)	Couple with at least one dependant child	Single parent at least one dependant child	Person living alone (not pensioner)	Person living alone (pensioner)	Two or more pensioners	Other
Annual Expenditure per household (2004/5 ADJUSTED TO 2008 USING RPI)		44,972	60,994	31,045	22,932	16,180	31,692	50,324
Expenditure on zero-rated goods and services		10,244	13,684	7,840	6,309	3,921	4,088	7,690
Expenditure on zero rated goods and services included in "mixed" expenditure		1,946	2,071	740	866	707	2,253	2,625
		32,782	45,239	22,465	15,757	11,552	25,351	40,008
Expenditure on exempt goods and services (including financial services)		7,428	13,096	5,857	3,629	2,073	4,418	8,817
Expenditure on goods and services supplied by businesses below threshold		2,243	2,904	1,550	1,083	842	1,755	2,725
		23,110	29,240	15,058	11,045	8,637	19,178	28,466
GST		693	877	452	331	259	575	854

1			Quintile 1	Quintile 2	Quintile 3	Quintile 4	Quintile 5	All households
	Annual Expenditure per household (2004/5 ADJUSTED TO 2008 USING RPI COMPONENTS)	1	16,123	22,092	34,054	49,616	86,011	40,511
	- Expenditure on zero-rated goods and services		3,739	5,593	8,054	9,604	16,740	8,559
	-Expenditure on zero rated goods and services included in "mixed" expenditure		494	795	1,340	1,948	4,351	1,729
			11,891	15,704	24,660	38,064	64,920	30,222
	-Expenditure on exempt goods and services (including financial services)		1,922	2,580	5,331	9,683	18,462	7,334
	-Expenditure on goods and services supplied by businesess below threshold		923	1,193	1,732	2,546	3,993	2,029
			9,046	11,931	17,597	25,835	42,465	20,859
	GST		271	358	528	775	1,274	626
	Weekly income		189	354	503	772	1,674
	Ratio (GST/Income)		1.43	1.01	1.05	1.00	0.76

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Is GST regressive?

Terry has consistently lied to States members, and to voters, that GST is only “mildly” regressive by giving tax against spending figures and that is reflected in the table above. Measured against income, as every other economist in the known universe would do, its true nature is revealed.

The ratios of tax to income, which I have included in the table, clearly show that GST has twice the impact upon the lowest earners (1.43) than it does on the highest (0.76).

GST truly is a tax on the poor.

Missing millions – has Terry got his sums right?

As I have said above, I will not argue with the “official” figures for GST; they are damaging enough on family budgets. However, it occurs to me that the simplest of tests to cross-check the figures immediately throw the sums into doubt. If the yearly average family GST bill is only £626 as Terry claims, then how much is raised in total by the tax?

Terry still has a target of £45 million from GST. This includes a “contribution” of £7 million from finance; so, £38 million from families. There are currently around 37,000 households in Jersey so the total raised is easy to calculate:

37,000 families x £626 average GST = £23.1 million.

Ooops! Terry appears to be £15 million light. I look forward to hearing his explanation of where this £15 m is to be found. Of course I may have got the whole thing round my neck, and the answer is so blindingly obvious I may want to kick myself.

On the other hand, if you want to raise £38 million from 37,000 households, the sum is not difficult. You need to charge them ….. about one thousand pounds …. which is where I started last week. I await developments. Geoff

…more follows soon as we explore the so-called “generous” compensation for GST…..

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Coming soon to this section:

How to get rid of GST in 3 easy stages.

Read it here first.