Guernsey rejects income tax rise in favour of a Goods and Service Tax

Guernsey’s parliament, the States Assembly, rejected a planned 2% rise in personal income tax rate that was proposed in the 2025 Budget and instead voted in favour of introducing a consumption tax, like Jersey’s 5% goods and services tax (GST), from 2027.

The tax plan came as the island faces a national deficit of £100 million this year. The introduction of GST had been rejected by Guernsey’s parliament three times in the past two years and the Policy & Resources Committee had instead proposed a temporary rise in the rate of personal income tax from 20% to 22% for two years to balance the books.

But when the Budget was debated in the States on 8 November, an amendment was tabled to introduce a GST in place of the proposed income tax rise, which was approved by 20 votes to 15. Proposers said it was the preferred way to raise most of the revenue needed to put the island’s finances on a sustainable footing.

The proposals for a GST from 2027 are not expected to return for approval before the general election in June 2025, so will need to be approved by the next States Assembly.

“An income tax rise is problematic for our competitiveness, whereas a GST is a tax that is applied in almost all of the world,” said Stephen Rouxell, finance and accounting lead for Guernsey’s Chamber of Commerce. “It also ensures that a number of people currently not within the tax frame living here in Guernsey would be brought into the tax frame.”

The Budget, which was published on 9 October, also included proposals for the introduction of a new tax regime to comply with the OECD’s Pillar Two framework for multinational enterprises (MNEs).

It was noted that additional revenue would accrue from the introduction of an Income Inclusion Rule and Qualifying Domestic Minimum Top-Up Tax for large in-scope MNEs with global annual revenues of more than €750m in accordance with the OECD’s Two Pillar Global Minimum Tax rules.

Regulations are expected to be implemented for accounting periods starting on or after 1 January 2025, but the availability date for the legislation is still uncertain.