Friday, February 26, 2010

TOP & BOTTOM – ALL A QUESTION OF ‘BALANCE’…

In the same States sitting that government debated – and rejected – proposals from JDA Deputies Trevor Pitman and Geoff Southern, that would have brought increases to the minimum wage of between either 16 or 8 pence respectively above the proposal from the Social Security Minister, we were interested to also note the answer to Trevor’s written question No. 17 on 1.1.K taxation as indicated below.

“Given that 1(1)(k) classified residents fall into two categories; namely those who were granted residence before current regulations were put in place, and those who have been granted residency since, will the Minister list the number of individuals by year for the period 2005 to 2008 inclusive, who paid tax within the following brackets –

(a) less than £20,000;
(b) between £20,000 and £50,000;
(c) between £50,000 and £70,000; and,
(d) between £70,000 and £99,000?

If any 1(1)(k) classified residents do fall into these categories, would the Minister advise how this fits into the framework outlined within the relevant income tax legislation?”

Trevor has promised to write an article relating specifically to this subject in the next week or two.

In the meantime we publish the figures below for people’s comments. Whether one supports the concept of 1.1.K residents or not, the actual figures below teased out by Trevor’s question to the Minister for Treasury & Resources make interesting reading. Not least being that somehow the Minister managed to overlook answering the crucial aspect of just how some of these surprising figures actually fitted into what is written into the legislation.




For reference
the current regulations to which Trevor’s question refers are that of Article 135A of the Income Tax (Jersey) Law, 1961. It should also be noted, of course, that this Article applies only from 1st January 2005 to any person who is given consent under 1(1)( k) housing rules to acquire and occupy property in the Island.


Under this Legislation, those individuals granted 1(1)(k) status are meant to be taxed at the following rates:

The first £1m of foreign income at 20%
The next £500,000 of foreign income at 10%
The balance of foreign income at 1%
All Jersey source income at 20%

Those individuals who were granted such ‘status’ prior to the above date are not subject to the provision; but rather were able to arrange a ‘negotiated’ tax contribution. This presents a number of questions in itself as it has been argued that it is debatable whether or not any such possibilities actually existed within Jersey’s law at the time. One further question we know Trevor will be pursuing is whether there is any truth in the rumours of a small number of ‘high value’ residents actually paying tax that actually falls beneath the figure of £10.000.

With regular re-assurances that all 1.1.K residents contribute at least £100.000 in tax, many people in so-called ‘middle Jersey’, not to mention those on a minimum wage justified from within the likes of the Hospitality Association as being ‘offset by cheap food and accommodation’ (quoted on Channel Television) will be interested to say the least. After all, as so many States Members were happy to suggest during the debate on the minimum wage: it really is all a question of achieving ‘balance’…

13 comments:

  1. JDA/David/Trevor

    For those of us who are not IT boffins can I suggest you blow up the stats chart for this story. I worked out by chance that clicking on the format bar did this but some even less adept than me might not do so and possibly would not get to then read how surprising these stats are. I suppose it could just be that I need new glasses? But I don't think so.

    I would hardly describe myself as a natural JDA voter but these figures certainly do seem to explode a myth that all of these individuals are contributing hugely to the economy. I would like to know how it can be possible that some, and lets be clear it is not all, can get away with paying so little? But well done to the JDA for getting the information in the first place. It is as I say an eye opener. If you can't blow the stat chart up then maybe a line telling people like me what to do?

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  2. Thank you for your comments, Matt. I have now reuploaded the table as "large" instead of the default "medium", but even that is reduced from the original size. In Internet Explorer 8, and maybe other browsers, Ctrl and + zoom in and Ctrl and - shrink back

    A few of the older 1,1,k's will have agreed their terms decades of inflation ago, and were originally paying a lot at the time. However there was later a policy of letting them in for minimal tax in the hope that they would invest heavily in the local economy. Only about 10% did though, so that was a failure.

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  3. Deputy Trevor PitmanFebruary 27, 2010 at 1:29 PM

    Hi

    Thanks to Dave for making the chart more readable. The blame lies with me, Matt, as I cut and pasted it direct from the answer to my question. An IT 'boffin' I am not!

    As I said, I just don't have time to write anything at length - some of us just can't afford to ditch our constituent work, Scrutiny and the like to push off and even miss a whole States sitting. You know, to lie by a swimming pool in Africa; or sit in the sun and watch the cricket with a Pimms No. 1 in hand. Nor, I am pleased to say, do a good number of us have any such inclination.

    But another little bit of food for thought on this issue for people's comments.

    With the above stats in mind, and the fact that Colin Powell is on record making it quite clear that there is absolutely NO evidence to indicate that if our most wealthy residents were told they had to contribute a little more (as the table shows, even what they are MEANT to pay would be nice from a number of them!)within a genuinely progressive taxation system, just consider this information that I managed to get from a question a couple of weeks ago.

    And before anyone asks, no, I am NOT putting this approach forward as potential policy. The answer given from Treasury & Resources was actually not even the statistics that I was looking for, but it is interesting to say the least.

    Based on 2008 assessments, if a 25% rate of tax was introduced on taxable income over £100.000, then this would increase revenue by £12.3 million. If a 30% rate of tax were introduced this would increase revenue by £25 million.

    Now, I wouldn't propose such a step. But as it is quite clear that the COM are going to be forced to finally bite the bullet and take a more equitable, realistic approach to taxation within the next few years - rather than keep hitting the easy targets - I would be interested to see what possibilities others think are workable.

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  4. It will be interesting to see if the usually very audible finance-is-all apologists for these tax dodgers come on here now and defend the statistics. What price a few posts along the lines of "but they all pay GST as well" and/or "many of these people probably give money to charity!" If I could ask a question of my own here it would be this. With Jersey facing huge problems relating to population and adequate housing, what do people think might ultimately be of more real value - taxation that is nowhere near what it should be or some of the large tracts of land for possible re-development if some of the lower end tax-dodgers left?

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  5. I doubt anybody is really interested from the finance side Emma. Whatever tax these people pay it is better than getting poor people coming in and just sponging off our benefits systems. 1.(1)(K) people can just pack up and leave whenever they want. Some places will have them with open arms and for each one that leaves we still lose tax no matter how much they were paying. You only have to look at the UK now with its socialist tax system coming in. People just move somewhere else and there is nothing they can do about it.

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  6. Deputy Trevor PitmanMarch 1, 2010 at 12:41 PM

    Hi Gary & Emma

    I agree that there is the possibility that a 1.1.K resident deciding he or she did not like the idea of paying something a little more realistic could up sticks and leave. That has to be accepted as a danger.

    However, going by the two (sorry, nice if I knew more but I obviously don't hang out in the right circles!) 1.1.K's I know most would not leave because the other benefits of things like the island's beauty, climate, comparative safety - not least to bring up children, ease of access to the UK, stability and language etc are of huge significance to such residents.

    As I recall it was all of this that was not lost on Colin Powell when he made his comments. He was also not a man known for making rash statements without due consideration to all the possibilities.

    It would obviously be a different story if any increase in progressive taxation was to be out of all proportion. Here I always keep in mind watching the documentary story of one of my sadly departed musical heroes, Marc Bolan, talking about being effectively robbed of 99p for every pound back in the early 70s as an example of how not to run a fair taxation system.

    On the other hand those who object to any form of genuinely progressive taxation, no matter how moderate, must also be viewed as equally unrealistic in today's world. Those who further espouse the 'tax is for little people' maxim should be treated with total contempt. End of.

    Emma's question about land is also a very interesting one. With talk of the need to build up 'land banks' for future States development, as Emma suggests, when larger properties come on the markert, 1.1.K or otherwise, these certainly are worth looking at in the same light, surely.

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  7. The JDA are missing the point that these people have signed agreements which cannot be broken just because the JDA now want them to pay more tax for sea views. I thought the Treasury Minister addressed this subject in his budget speach last year anyway and will target zero tax payers?

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  8. Tory Boy. It is you who is missing the point. According to Hansard Trevor Pitman tried to get clarification from Ozouf on this point during the last States session. It had been little Eddy Gnome who had made the statement on legality. Time ran out if memory serves due to the usual waffling from the likes of El Tel. But hopefully Trevor will raise this again because it simply can't be correct or legal that the tax rates of you and me can be raised at the drop of a hat, but that of tax dodgers worth millions cannot.

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  9. Emma. I meant to add that your idea on buying up any larger estates that might become available if any of these tax dodgers pushed off is an excellent one.

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  10. Why wait for people to leave? With some of the tax being paid quite paltry compared to what has been claimed why not give anyone who thinks he or she is above little things like paying tax the choice. Pay up or face compulsory purchase. What is worth more to the island? Tax that many in 'middle Jersey' would be happy to pay or some sizable chunks of land to build much needed housing on. It is a no brainer.

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  11. I wonder if there are any 1 1 K people out there paying no tax at all? Like Zilch. Zero. Nothing. Nowt. 0, Sweet F A? If there are then how does this make our system fair let alone progressive?

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  12. Thank heavens for the Alliance.

    Politicians who are actually in touch with working people, ordinary people. I know this is not directly about these 1,1,k's but I am sick and tired of hearing that anyone who happens to find themselves on Income support for a time must be a scrounger, stupid or both. same goes for the minimum wage.

    Isn't it also odd how a multi-millionaire paying next to no tax is somehow not a scrounger if your politics are of the tory variety?

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