JERSEY’S Treasury minister Terry Le Sueur has countered suggestions that its Goods and Services Tax could rise dramatically within years. And he also denied that its zero-10 package had changed direction after he announced a more lenient approach to the island’s ’20% means 20%’ strategy.

Jersey will be left with a £80m.-100m. black hole when corporation tax is abolished in 2009.

Local sources suggested that an increase in GST would be the only way to balance the decreased revenue from only the highest 6% paying closer to the 20% income tax rate.

‘The principle was that those on higher incomes would pay more like 20% and we’d do that by phasing out some of the allowances they get,’ said Senator Le Sueur.

He added that Guernsey’s zero-10 package incorporated a similar approach with proposals on life assurance and mortgage relief.

‘We’ve been able to recalculate the figures and still generate the £10m. with only the top 6% of tax-payers paying an effective rate of 19.5%, 19.75%, or 20%, but most people would be unaffected.’

Jersey is aiming to raise £60m. from a variety of taxes, with another £20m. from economic growth and a further £20m. from efficiency savings.

Of the tax take, £45m. would be from a GST at 3%, £5m. from a pay-as-you-earn system and £10m. from ’20% means 20%’.

Income tax in both islands is already set at 20%, but personal allowances mean that people do not pay the full fifth of their wages.

Senator Le Sueur said that Jersey proposed to fill the black hole by a variety of means, only one of which was GST.

‘But whatever arrangement we come to, Jersey like Guernsey has to come to learn to live within its means. I think the public expects us to keep States spending under control, not simply raise taxes year after year. If we control States spending, there is no need to raise GST.’

But he added that if the public demanded more services, it would have to pay.

It was suggested that the GST could need to rise to 10% within years to help fill the black hole.

Jersey’s tax strategy was agreed by its States in 2005. Guernsey will debate the Policy Council proposals at the end of June.

‘The suggestion that we changed direction is completely mistaken. There’s a lot of detailed work. How you then recover from shareholders of companies rather than the tax previously paid by companies, these details are still being considered,’ he said.

The Policy Council’s zero-10 package relies more heavily on economic growth than the approach adopted by Jersey.

‘Economic growth doesn’t happen by accident, but happens if you have an economy that’s confident, buoyant and encourages growth and diversification,’ Senator Le Sueur

said.

‘We have looked at Jersey’s current economy. We have already got a buoyant economy, pretty full employment. People don’t want mass immigration.

‘I would say the chances for economic growth over a large period of time are pretty difficult.

‘You might manage one year in five or one year in three, but I think the average rate of two per cent growth above inflation every year was quite a challenging target, but one which is achievable.’