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’…

The Wrong Way to Fill a Black Hole

I see today that there is to be another taxation Black Hole. Let us hope that in filling it Terry will look to those who are most able to pay in order to fill it. I fear he won’t because of the sacred cow of not raising the 20% tax rate and the fear that the wealthy, being mobile, will leave. Has he not noticed that the most mobile in our society, who are leaving because they simply can’t afford to live here, are those young professionals – from trainee accountants to nurses – not yet on the housing ladder, that we desperately need. Low and middle earners are suffering from 20 means 20 on top of the burden of GST on essentials, and I know several who are planning to leave. Of course the zero/ten policy could be re-examined, but that seems also to have sacred cow status.

This brings me to the plan to freeze public servants’ pay. It always seems to be a popular measure because of the conception of public servants as highly paid fat cats pushing bits of paper around. The reality is that the bulk of them are teachers, doctors nurses, paramedics etc. who are increasingly in short supply. You may be told that there is no shortage of teachers, but whereas this may true in the primary sector, it is becoming increasingly difficult to recruit specialist secondary teachers. Posts are sometimes filled with applicants that are not ideal. This recruitment difficulty is exacerbated by the fact that pensions for new appointees are worse than in the UK, and conditions of working, especially in terms of lunch duties are worse than in the UK. It seems to me that Terry is being opportunistic in suggesting the pay freeze, and has not really thought through the consequences. There is no real need for the measure at the present time, as 2% has been allowed in departmental budgets. He is exploiting fears of unemployment and the fact that many in the finance sector are suffering pay freezes. Does this mean that when those in the finance sector are receiving whopping rises those in the public sector will too. You can bet your bottom dollar that they won’t. In times of inflation, public sector workers are expected to suffer lower than inflation pay rises in order to take the heat out of the economy. It seems only fair that now the economy needs thawing out, their income levels should be maintained in real terms. Perhaps there is a case for giving flat rate increases, as the lowest paid actually put all their income back into the economy ; the argument Terry uses for opposing this is that the lowest paid in the public sector are better off than those in the private sector. Is it reasonable to justify his actions by those of bad employers who pay starvation wages?

Athena

An Undesirable Consequence of Zero-Ten

Deputy Geoff Southern has always been willing to stand up for public sector workers, where others see them as scapegoats and soft targets. So, it came as no surprise to me that he was arguing a case against freezing their pay in these troubled times this week.

On the other hand, I do not feel that it was quite as sharp a line of reasoning as I have come to expect from him. Indeed, restricting their spending power does keep that money out of the economy. However, that money has to be withdrawn from the economy by taxation in the first place, to be available to pay salaries with. At least as much, and probably more of the tax will be taken from local taxpayers as will be locally spent by the civil servants who are paid with it.

Before Zero-Ten, of course, we looked to raise as much tax as possible from overseas. In those days, States wages were an effective trickle-down mechanism for bringing that bounty into the local economy. However, the Zero-Ten proposal quite explicitly stated an intention that local residents should become the principal source of tax revenue, and set about slashing the take from those who use Jersey from afar without being genuinely part of our economy and community.

Geoff's ideas could become right again, if we could dismantle Zero-Ten. The catch being now, that it would be difficult to abandon it at this stage, without frightening away more business than we got back into the net. It does need to go in the medium term, but it will have to be whittled away in a subtle series of stealth taxes. Before that, though, we need to find another generation of political leaders as shrewd as those in the 60s, who saw that tax capture would bring us far more prosperity than just skimming what went round inside the island. The present Ministers don't seem to get that they are on an unsound path at present.

Dave Rotherham