States of Guernsey Budget 2017

States of Guernsey Budget 2017

On Monday 3 October, the 2017 Budget report was released. Deputy St Pier said “Preparing the 2017 Budget in the context of the revenue shortfalls experienced in 2015 and 2016 has been challenging.

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Budget guernsey

On Monday 3 October, the 2017 Budget report was released. Deputy St Pier said “Preparing the 2017 Budget in the context of the revenue shortfalls experienced in 2015 and 2016 has been challenging. It is therefore particularly pleasing that it has been possible to produce not only a balanced budget, but one which is also simultaneously responsible, fair, progressive and realistic”.

The proposed rules will be debated by the States of Guernsey on 1 November 2016.

The Island’s financial position

The overall financial position of the Island at the end of 2015-16, although still in deficit, is healthier than expected; the closing deficit was £5.4 million, as opposed to the predicted £10+ million deficit. This was achieved through a combination of reduced expenditure in certain areas and increased receipts of document duty from house sales during the year. There are indications that certain measures and controls have been introduced around government expenditure, which will be seen by many as a positive development.

Tax for Guernsey businesses

No changes have been proposed to Guernsey’s corporate tax regime, which has seen a number of changes introduced in previous years. The stability will be welcomed by businesses operating in the Island, and those who may be considering expanding their businesses or indeed establishing an operation in Guernsey for the first time. 

The Policy and Resources Committee will continue “to monitor the appropriateness of the corporate tax regime” and to “report back to the States should it consider any changes are necessary”. In the current environment, it is smart to keep the business tax regime stable and consistent, yet being alert to changes that might be required in the future in order to adhere to international standards. It is worth noting that any such international developments would apply equally to Guernsey’s competitors. 

Personal income tax allowances

The proposed changes to the personal income tax allowances will impact individuals in Guernsey who are solely or principally resident for the Year of Charge 2017 onwards and are detailed as follows:

  • The personal income tax allowance will increase to £10,000 per person (from £9,675);
  • Withdrawal of the personal income tax allowance for individuals whose income exceeds £138,684 a year; the withdrawal will apply at a ratio of £1 for every £3 that the threshold is exceeded (i.e. once an individual’s income exceeds £168,684, they will receive no personal allowance);
  • The personal income tax allowance will be pro-rated in the year of arrival or permanent departure from Guernsey, based on the proportion of time spent in Guernsey during the year.

Other proposed changes

The usual duty increases are there, which do directly impact the cost of living in Guernsey, and go a way towards counteracting the increased personal tax allowances.

  • TRP: proposed increase of 10.5% to the domestic and land tariff and 5% in respect of commercial property;
  • Document duty – the regime will be reformed to a gradual system, to reduce the tax paid when buying a property for less than £800,000 and duty increased for properties above this amount;
  • Benefits in Kind charges – to increase with effect from 1 January 2017 by 3% per annum, compounded for the Years of Charge 2017 to 2019 inclusive;Income tax on company distributions for arrivers to Guernsey – prior to the date of a beneficial member becoming Guernsey resident, distributions from accumulated profits of companies not incorporated in Guernsey and not carrying on business in Guernsey will be exempt from Guernsey income tax, subject to certain conditions being met;
  • Excise duty – some of the notable proposed increases are:
  • 5.6% increase in the duty on cigarettes;
  • 2% real terms’ increase in the duty on alcohol; and                   
  • 5p increase in the duty on a litre of fuel. 

 

Full details of the proposed changes can be found on the States of Guernsey website

KPMG in the Channel Islands can provide you with further insight into how the proposed changes can impact individuals and businesses in Guernsey.

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