LOW earners could be targeted with extra tax allowances as opposition to the idea weakens. Deputy Peter Roffey has welcomed indications given at a public meeting about the Budget that the income tax system could change and he will be pressing to see this fed through for 2009.
Treasury has not proposed an increase in personal tax allowances for next year because it was a very expensive way of giving minimal assistance, with the richest and poorest benefiting to the same degree.
‘Until the late 1980s you had an additional personal allowance which was over and above the basic personal allowance but was only available to people with modest incomes,’ said Deputy Roffey.
‘There was clawback further up the income scale.’
The then Income Tax Authority moved away from the system, wanting greater simplicity - something Deputy Roffey opposed at the time.
It was a three-tier system with a basic personal allowance, an additional personal allowance and an exemption allowance for different groupings such as single people or married couples.
If the level of income was below the exemption allowance for their circumstances, people would not be caught in the tax net.
Those whose income just exceeded the level were given marginal relief.
‘I have felt ever since then that we have become too obsessed with simplicity rather than fitness. I’m delighted that there seem to be at least sympathetic noises coming out and serious consideration might be given to it in the near future,’ said Deputy Roffey.
With greater computer power available now than in the 1980s, Deputy Roffey said administration of a targeted system should not be a problem. But explaining to the public how it worked might be, he admitted.
‘The economy is buoyant, but as we go through this change in the system over the next few years we will not have a lot of cash to throw around so focusing it will make a lot of sense.’
He gave the example of someone on a pension that was going up by RPI.
‘They were not a taxpayer a few years ago. Now, because of the value of allowances, they could get dragged back into the tax net.
‘It’s that sort of scenario where personal tax limits need some more help.’
The personal allowance in 2009 for a single person will be £8,250 and a married person’s £16,500.
Deputy Roffey said he would not push an amendment to change the system now because of the amount of work involved.
‘Hopefully the positive noises heard at the meeting will get confirmed at a political level and they will continue to look for this to be considered, hopefully in the Budget at the end of 2008 for 2009.’
The UK’s answer to the problem, tax credits, has faced strong criticism.
States Income Tax will have more time to look at a solution suitable for Guernsey as work associated with zero-10 - the abolition of corporation tax - eases but any new system would have implications such as investing in computer systems and even the size of the authority’s premises.
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