Reforms to Guernsey tax revealed, including GST

A 3% goods and services tax (GST), the re-introduction of vehicle taxes and lower income tax bands are among the reforms that Guernsey's Policy and Resources Committee wants to make to the tax system to plug an estimated £50m gap in its funding.

Corporate taxes have also included in the planned reforms, with the extension of a 10% rate paid by companies expected to raise an estimated £6m, senior politicians said.

Policy and Resources President Lindsay de Sausmerez said: "This package is a balanced, pragmatic and proportionate response to the financial challenge we face. It will improve our financial position by £59m a year."

Politicians are due to debate the proposals in July.

Also among the proposals are for earnings between £15,800 and £28,000 to be taxed at a rate of 15% - a reduction of 5%.

Allowances for social security contributions will also be hiked, with no contributions on earnings below £11,222.

P&R said it had a long-term aim to increase that threshold "if and when it is affordable".

If approved, the GST will come into force from 2028.

A number of islanders said they were concerned that the rate could be easily increased. However, the proposals said there would be "legal protections against the erosion of the relative value of mitigations should the rate of GST rise in future".

Alongside GST, P&R is proposing an International Service Entities (ISE) scheme which will charge finance services with international clients.

It was hoped that would raise £10m to £12m, the proposals said.

Drivers of electric and hybrid vehicles are also due to begin paying their way, with an annual vehicle tax being introduced.

This would be based off the weight and emissions of all vehicles, with charges ranging between £25 and £280 a year, the proposals said.

With the reintroduction of vehicle tax, fuel duty would be slashed by a quarter, with P&R estimating it would save the average person up to £140 per year at the pumps.

De Sausmerez said the island's finances needed to be on a "stronger and more sustainable" footing.

She said: "Finding a way to raise more revenue for essential services, whilst also protecting those who are financially vulnerable, has been a challenge. But the 2026 Tax Reform Package meets both aims in a measured and manageable way.

"Another important feature is its flexibility.

"We recognise that there are still some unanswered questions around future sources of revenue, such as from offshore wind, Pillar 2 and economic growth, so we've designed in an opportunity to take stock of the financial situation when we'll have more clarity on those and other issues."

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