‘Guernsey’s tax cap is not competitive’
Monday 22nd September 2008, 2:29PM BST.
TREASURY minister Charles Parkinson has once more talked about the possibility of lowering the island’s tax cap from £250,000.
His comments were made in last week’s Financial Times special report on doing business in Guernsey. The article said the island could sharply reduce the level of its tax cap (the ceiling on the amount of tax someone may be required to pay) to around £100,000 in an attempt to persuade more wealthy entrepreneurs to relocate to the island.
Deputy Parkinson (pictured) said he doubted whether the tax cap, which was introduced as part of the zero-10 strategy, affected many in the island.
‘I don’t know if there are any,’ he said. ‘So it is something the department is considering – whether it would benefit the island to offer a more attractive deal.’
At the moment Guernsey’s level of £250,000 is higher than that of its competitors in the Isle of Man and Jersey.
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I think that it is sad that so many people are involved in weath bashing on this issue. Without having the time to do extensive research (I have to work for a living and am not a rich person), I understand that the average wage in Guernsey is around £35,000. With a circa £8000 tax free allowance plus some modest deductions to mean tax payable on say, £25,000 per year is tax of £5000 per year. How many people who criticise the principle of tax capping sit and think that it takes 50 “average” tax payers to contribute as much as that one tax capped individual. A dog in the manger viewpoint about this may be popular down in the pub, but when it comes to collecting the maximum amount of revenue to keep this lovely island running, we need the maximum tax take from a very limited population. “Capping Bashing” attitudes runs the risk of alienating rich people (do they really want to move to an island where people seem to hate success so much?!). The reality is that if fewer higher tax paying individuals settle the working man is at MORE of a disadvantage, not less. If another 50 tax payers can’t be found the bills (population capping is an active policy) then the only way to take more tax is to tax EVERYONE at a higher rate. Come on you detractors. Get off your soap box, it may win votes and approval from the poorer in our society, but the critics won’t be paying more into the system than they will take out in a lifetime – the tax capped individauals will. Like it or not: the economic reality is that they help us all. They should be encouraged to settle here and Deputy Parkinson is right to encourage more of them here. They bring alot more to this society than they take out. Remember: 1 of them or 50 of us??? That is the only choice. Embrace them, embrace thier tax cheque. Or would you rather keep the wealthy out and pay more yourselves?
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Anon
Hating success? What gives you that idea?
It’s called taking responsibilty. We don’t want to attract people who don’t take their responsibilties seriously. If you are to cap the population, we do not want to replace poor locals with rich non locals. Unless we are to turn into Monaco. Some would like this, I suppose.
Regressive tax measures do not fit in the modern world where society should come above rewarding the rich disproprtionately.
Nothing to do with success and everything to do with unnecessary greed.
Seriously, an average of £35k?
And seriously, yes to your last question. It’s called reality.
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I can’t see how the capping of tax for a few people will help the ordinary taxpayer to any meaningful extent.
It’s a little confusing that we are being told that the rich immigrants will only come if they have further inducements. Yet, we are also being told they want to come to Guernsey because of the lifestyle etc.
I suggest the reality is most will use Guernsey for what they can get out of it.
Anon can use throw away statements such as they bring more (actually Anon claims alot more) that they get out of Guernsey. Full stop. No evidence of any kind.
Well,I reckon many will be sceptical about such statements.
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Would we rather have 1 super wealthy resident, or 50 run of the mill locals, asks Anon.
I would go for 50 of us any day! Why should the majority have to subsidise the lifestyles of the obscenely rich? It beggars belief that anyone could even begin to justify such a situation!!!
What do these people bring to the island? They do not contribute proportionally to the “pot” for public services, send their children to private school locally or boarding school in the UK, clog up the roads with their unnecessary cars and doubtless produce more rubbish than “average joe”. And what about how much s**t they generate. Our sewage system is struggling as it is without being subjected to increased effluence from the mouths of our wealthy residents and the politicians who are trying to butter them up.
Guernsey would not fall to pieces if we didn’t reduce – or even increased – the income tax cap. I would say that the stronger argument is that Guernsey will fall to pieces if this love affair with the rich is pursued with such ardour. A winter of discontent is on the horizon. When people feel taken advantage of, they will react.
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I have to agree with SJ on this, there is very little this very small category of people will add to island life, they will add £xxk to the states but they will remove just as much in our traditional values. Hasn’t anyone learnt from Sark’s investments in outside wealth?
Belinda – did you read your post, when you mention having 50 of “us” to 1 of them and then complain about cars and sewage, how does 1 person drive 50 cars or produce 50 loads of sewage / rubbish – really get real.
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Anon does have a point !
If the average income is £35k, the average tax taken on that is £5k, this is an effective rate of taxation of 14.28%.
Lets also assume that the cost of public services is the same as the average tax taken (£5k).
Under the current tax cap, a high earning individual (Tax capped at £250k) is paying for the public services consumed by upto 50 other islanders. The high earning tax payer consumes the same amount of public services as any other individual and pays an effective tax rate of 19.84% (of course if the actual amount earned by this person is double that which would be capped then the effective tax rate should be reduced accordingly).
The proposal by deputy Parkinson seems quite fair to me (obviously subject to impact analysis). I’m pleased that the elected members of the states look at things with a modicum of reality compared to some who didn’t get in.
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But jamie, it is not reality. It is vested interests. The reality is that the majority do not get these perks just for living in Guernsey. That is the crux.
Who looks after the poor? It certainly doesn’t come from subsidising the wealthy. It is the average earners (what is the average, not £35k?) who get hit hard, those with children in our state schools, those that can barely afford medical care, those that run the island for our masters to squander on ‘image’.
Being wealthy is not a reality. It is only the top percent or so. We need policies for the majority.
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So wealthy incomers don’t contribute do they ? How many jobs have been created for ordinary Guernsey people, offering excellent jobs outside of the finance industry, at Specsavers and Healthspan by the Perkins family and by Derek Coates, to name but two ? What jobs would those people be doing if those two businesses hadn’t been set up in the first place ? These are businesses which could easily have been set up elsewhere with much lower salary costs than exist here in Guernsey (and which could just as easily be moved if we didn’t make the wealthy shareholders welcome here).
Assume that 600 people are employed here by those two businesses at an average wage (across the board) of say £35k. That’s a total payroll of around £21 million upon which income tax and social insurance is paid, not to mention the knock-on impact for the economy of how those salaries are spent on the island, resulting in even more jobs and even more tax and social insurance.
That’s why Guernsey needs to attract wealthy business people and entrepreneurs, otherwise they will take their job creation opportunities to somewhere else where they are made to feel welcome and there are plenty of other places eager to attract such people and the jobs that they can create.
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Harry – my comment about sewage – if you read it carefully -was referencing what came out of mouths – not through the digestive system. And if you look at the car use of the wealthy homes against the car (or public transport) use of the less wealthy then I do not think that I am in any way disengaged with reality.
And David – please can you tell me when the Dark Ages in Guernsey’s history were? What precisely did the locals do before Coates and his ilk came down from heaven to bestow on us these gifts?
You talk as though Guernsey and its people have been rescued by these tax avoiding entrepreneurs. Utter rubbish. Guernsey and its people are being exploited. We have a wealth of riches here that we could be using – and we don’t need to subsidise the lives of the wealthy in order to do so.
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Hotels employ mainly non-local staff.
Specsavers would do well anyway because of the corp tax, nothing to do with wealthy entrepreneurs.
Why pay for the idle rich when the hard working poor are seen as inflationary and secondary to the island’s needs.
Feel welcome? Is that all Guernsey is good for. Where are people getting this average wage from? Shows how real the defenders of wealth really are.
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I always though that Dame Mary Perkins was a Guernsey girl. Isn’t she connected with Specsavers. Or is she classed as an immigrant for sake of getting the point across?
What evidence there is shows that those who use Guernsey get a good deal out of it. They find place where they can avoid or plan their taxation to pay as little as possible, avoid other odious taxes but still complain when it is suggested they might pay a little more to the communal pot.
I find it facscinating that one of the arguments for capping income tax at £100k is that the present levels are higher than other places.
Funny enough the same argument does not apply when other places have high=er levels of social security payments and capping than Guernsey. You can also throw in the fact that some competitors have lower rates and payments of income tax than Guernsey.
Finally, a good post from Belinda.
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Lawrence,
The £35k average is made up for illustration. I think the actual figure is nearer £28k if I recall correctly from the guernsey facts and figures booklet.
What I really do not understand in your, and others, arguements is the notion that the poor are paying for the rich?
If (and im using made up numbers again), a low earner contributes £3k to tax and utilises £5k of public services and a high earner contributes £100k yet utilises £5k of public services, in what way is the low earner “subsidising” the high earner ?
How precisely are the “hard working poor” paying for the “idle rich” ?
I want to understand your arguements but to be honest it just all reads like envy at the moment.
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Belinda Don’t leave us in suspense. Just what wealth of riches are you refering to ? We can’t export granite any more. Tomato and Flower exports have all but ceased . Tourists have voted with their feet. Please enlighten us
Lawrence Have you read the Guernsey Household Expenditure Survey on gov.gg You’ll wet your pants when you see all the facts and figures you can have a pop at
Average household earnings ( not individual earnings ) appear to be between 40 and 50,000 per year
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jamie, give up, they will never see the obvious sense you are talking. The reality is that the “rich” subsidise the “poor” and not the other way around. We are not paying for the rich – we are seeking to attract them so they can pay for the poor – as unpalatable as it may be for many to admit that those in the fort are actually good for something other than “tax dodging”.
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Ray – from where I am sitting right now I can see the Little Russel. So here is idea number one: We live in one of the most tidal areas of the entire world. At present fossil fuels are becoming more and more expensive (oil price rises of the past couple of days for example). We don’t even need to put in the infrastructure ourselves – the energy companies are crying out for new sources of energy so we lease part of our territorial waters to one of them?
Tourism has never been a major industry as it was in Jersey, but it has the chance to resurrect itself and potentially become more significant in the past. Flights to more far flung destinations are becoming more expensive, and Guernsey will become more attractive as it becomes relatively less expensive. Plus there has been investment in the arts, for example, so there is a potential for developing “niche” markets.
Above all, by working as a commmunity we have the ability to become far more self sufficient, thus reducing the amount of imports that are brought into the island. Already many island restaurants are joining this “use local” movement and that will generate income, employment, and reduce our reliance on imports.
Think outside the box. Guernsey has more up its sleeve than the powers that be would have us believe.
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Jamie
Low tax on the rich makes the rich richer.
The tax take is essential to keep services running. Capping the rich means placing more burden on the poor.
How is that fair?
Also bear in mind there is no IHT, and the scene is set for takeover by the wealthy.
Echoing Belinda, were people unhappy before this wealth appeasing mentality landed in Guernsey?
If we are to attract ‘wealthy entrepreneurs’ by giving them freebies, why not do the same for much needed workers and abolish the 20% altogether. They need it much, much more than the rich.
I am not envious of wealth. Only a child would be. I am concerned that our politicians are doing everything possible to cause division within a once close-knit society. People only need enough money to survive. That should be tax free. Anything more than that needs taxing on a progressive scale. The hard working will still get rewarded as their wage will increase, just not as fast as the greedy minority want.
There is no defence to feeding gluttony.
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Ray
So for a thousand households, the average individual wage must be £20k or so. Also the house expense numbers look very low, certainly new mortgages now will be more than £250 a week.
The point is, we can afford to give more back to the rich but we can’t afford to pay the essential workers any real rise without them getting flak left, right and centre and being accused of being greedy.
This is the unreality of the situation.
David, we have full employment, why do we want more entrepreneurs to create jobs? With an aging population we need to be shoring up the tax system to pay into pensions, not reduce it further and hope that something good will happen.
Unless we raise the population by 10-20%?
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Lawrence we do need to increase the population, at least the working population, to offset the demographic problem facing us over the next couple of decades. We have no real option on that front. It must be controlled immigration, and the island needs a clear plan to cope with it, in terms of extra housing and other knock-on effects for the infrastructure. The total population doesn’t need to increase beyond 2,000 to 3,000, around 5% maybe, provided that the vast majority are working. And yes, we do need more entrepreneurs to ensure that the economy has some diversification and that there are opportunities for islanders to work outside of the finance industry.
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Does it mean we will pick and choose what type of ‘wealthy entrepreneur’ comes in or does it mean we will accept anyone with a wad? Who will do the vetting? Will they be asked “will you employ lots of people for the sake of the old folk?” Or will they just be assimilated into the smoking rooms as peers and all enjoy a guffaw at the essential workers’ expense?
Now watch this drive!
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Entrepreneurs are good, diversification is good. In a economy that is so reliant on the finance industry it is good to know that Deputy Parkinson is looking outside the finance industry box. This is a good way of encouraging such persons to the island so that funds can be put back into the island in an non dircet (income tax)way.
I can’t say i’m sure I can agree with the statements of the rich taking more out of the tax system. No doubt, 2 of the biggest spenders in the economy is the health and education. The majority of high earners will have private health insurance and put their children through private education, thereofre creating less of a burden on tax funded services.
Finally, being members and benefactors of a capitalist society, I see these moves by deputy Parkinson as leadership; not responding to market pressure as we had to for zero 10 shows he clealry has his head screwed on which will be good for the island!
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David evidently believes the misleading propaganda published in the Billet to justify increasing the population.
The truth is that a massive increase in population would be required to make even a significant inroad into the demographic problem.
A better solution is to encourage people to work longer. Both carrots and sticks may be needed.
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Papillon you are absolutely right on the last two points. The Billet is not “misleading propaganda”. Its obvious that all people on the island today will be 20 years older in 20 years time and the birth rates of the past 20 years tell us how many people will be in the work force in 20 years time. We know that people on average are living longer than ever before, and we know how many 50-60 year olds are working today and will need to be replaced in 20 years time when they have retired (even if they extend their working life until 70 rather than 65). Not all of them will want or need to do so of course. Its actually quite a reliable set of statistics and if we ignore it then we will look very stupid indeed in 20 years time having had ample warning to plan ahead.
There needs to be clear and cohesive plan to have carefully controlled immigration going forward, and somebody needs to strike the right balance between allowing controlled immigration to protect the island as much as possible from the effects of excessive population growth and introducing a free-for-all which gets totally out of control. It won’t be easy but its a challenge that we have to confront.
Lawrence – I see nothing changes with your constant cynical drivel.
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Lawrence
The job vacancy pages of the Guernsey Press are always a useful source of determining the going rate in the workplace , especially States jobs which usually publish salaries.
For instance an August 2008 ad for a Prison Custody Officer offers £18,778 per annum for a quite responsible job
If the successful applicant is a maried man under 64 years old he will have a Tax allowance of £16,500 leaving him with tax to pay on the remaining £2,278
If he has children and a mortgage I would think his additional allowances would be such that he would pay almost no income tax at all.
How does this person subsidise the rich ?
Which part of the rich person’s £100K tax allows him more use of the public roads,or a better service from the Police ?
Will the Fire Brigade attend his house any faster than they would his poorer neighbour?
Does he get to the head of the queue at the Airport or PEH or Beau Sejour
Is his milk from the dairy of better quality
Does the rich person’s child get a better education in our States schools and when he gets into trouble as a teenager will he get a better Legal Aid service ?
Of course not.The man who pays no tax will receive the same level of taxpayer funded services that the rich man’s £100K buys him
If as often happens the rich man wishes to enjoy more of the fruits of his labour ( not every rich person got it all from ‘daddy’ )he will pay for a better education or health care or whatever else he chooses to spend it on
It just happens to be the way of the world
I know you are desperate to change it but I can’t see it happening in your lifetime
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Anon 2 – I presume that you meant beneficiaries and not benefactors of a capitalist society. However, whatever you intended to say, I cannot agree. In what way are the average people beneficiaries of capitalism? For every economic model that lauds capitalism as the ideal, there is an opposing model that illustrates that the “trickle down” effect is a myth, and that capitalist societies actually exaggerate wealth disparity. Tomorrow an article is to be published in which the Archbishops of Canterbury and York denounce capitalism and the greed it engenders.
If you want to accomplish private profits and social losses then attracting wealthy capitalists by lessening their tax burden is the way to go. If you want to strive for a balanced society then proportionate, or even progressive taxation, is the only solution.
People will not be blinded by horror stories for much longer. And Guernsey doesn’t need a population increase. Honestly, where precisely are we going to house these extra thousands?? Some people (and unfortunately that includes many of our elected politicians) are living in cloud cuckoo land.
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Belinda- don’t overlook the fact that in 20 years time and further beyond, our much larger elderly population will be downsizing their family properties and will be needing sheltered accommodation/nursing homes etc. Somebody suggested to me the other day that we may well need an extra 5,000 to 7,500 beds in suitable accommodation (which doesn’t exist at present) for the projected elderly in 30 years time. As a result there will be lots of existing family-sized homes becoming vacant so an enlarged population will have slightly less impact than you might think.
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Belinda, Thank you for correcting me earlier.
A few years ago I would have agreed on the balanced society principal, however i then realised that this was an idealistic point of view and something that could never happy unless communism could take a hold.
Capitalism is there to do what you wish, it encourages a free market and choice! I choose to embrace capitalism and if there are holes in the rules that govern it (in this case a competitive tax rate) I will quite happlily use them to benfit me. If you choose not to embrace it and whine about it, there is a choice to move away from it.
Deputy Parkinson is simply using his noggin, and choosing to exploit the western(plus a bit more) capitalist nature to attract entrepreneurs and diversification, which can only be a good thing for our island. If you beleive that this is just purely the exploitation of islanders, I don’t hear any workers at Specsavers, Healthspan or in fact the finance industry moaning about having a competitve salery, security and high expenditure lifestyles.
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Ray
You miss the point entirely. Someone earning £500k should pay tax on £500k and questions need to be asked why they are being paid £500k. A system that allows society destroying salaries and bonuses that we see daily in the news, that feeds the offshore market, that cripples human faith in the notion of hard work and success should not be allowed to exist.
Why attract people to Guernsey that care only for tax breaks? This is entirely illogical, entirely immoral and absolutely a kick in the teeth to those that work for the good of the island, unstinting in their vocational devotions and yet get real term pay cuts year in year out.
The whole system is a disgrace to humanity.
David, will you be forcing the old folk out of their piles and acquiring their property as collateral for infirmity? What a ridiculous notion to say that the building of 7500 units will be offset by those leaving old family homes. Also my cynicism is driven entirely by those people that believe that lowering income tax caps will in anyway help Guernsey.
Competitive? Against what? Using what models? Where is the starting point? Is the famous hard done by ‘middle income earners’ of £80k with their three cars and their fenced in ranges? Why do we have to aspire to perpetuate this nonsense that we live in the real world. We are rich, yes, we want to maintain high standards.
Kids are leaving school unable to interact with the business community due to poor educational practices. There is no excuse for that. These kids are ESSENTIAL to the well being of Guernsey. They will work in low paid, unstable jobs and end up contributing little. Are we proud?
The pension fund is inadequately managed creating a far bigger problem in the future than is being discussed. Inexcusable.
Guernsey assets are being sold, despite having massive economic growth in the last ten years, to fill holes created by mismanagement. Inexcusable.
The rich are being buttered up to come over here, to buy out the best properties (and more), to influence political decisions, and to distort inflation beyond the living means of the average.
Back to Ray’s example. £18k for an essential worker. Married with kids and a mortgage. Using his numbers, the spouse is not employed. How will he fare in Guernsey’s brave outdated world? How will they feel every morning knowing that the guy up the road sits at a desk making ‘decisions’ on how other rich folk should allocate their capital, and getting State subsidies to do it? The whole thing is upside down.
This sort of ecomonic theory is unsustainable, David, you admit as much by saying that we need to increase the population with foreign low paid workers. Businessmen that may be attracted to living in an overcrowded island with raw sewage on the beaches will not be wanting to pay local wages, as the locals that remain will be either secure in middle finance jobs or scraping their existence serving the rich.
Unless the plan is to use all this mythical tax income on improving the lot for the poor rather than maintaining the perks of the rich then expect opposition. It is quite clear that the people that argue the case for dropping SS contribution caps and dropping income tax caps (we need to simplify that system) have never, ever known the worry of having £1500 a month to pay the mortgage and feed and clothe kids.
This crippling ideology serves only to create the two tier economy that is a mainstay of the morally ambiguous.
If we want to mitigate the demographic problem we should be looking at milking these good times to create surpluses, not cutting back ever further and disillusioning the future generations.
But the obvious intent is to replace Guernsey people with non Guernsey people ‘as the business they bring in will keep the buses running on time’.
Cynicism is the only reaction to the breakdown in common sense.
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Lawrence I will ignore your social arguments because we will perpetually agree to disagree on that point. People get paid what the market forces dicate – nothing more, nothing less.
Nobody is talking about kicking elderly folk out of their homes. Has it occurred to you that 70-80 year olds won’t want to live in 4-bedroom family houses with stairs and which are expensive to heat ? They regularly downsize already.
“The rich” to whom you refer are coming here to buy open market properties, not local market properties. The properties that they buy are not properties which are even available or affordable to the average local.
I think you will find that I stated on this blog several weeks ago that (most) public sector workers deserve to be paid better. You will also find that I stated that I could find no real argument to defend the earnings cap for social insurance. Its vital that essential workers here can afford to live here, whether they be local or foreign. Please get your facts rights.
Immigration policy needs to attract people who can generate income tax revenue to the island so that the cost of looking after the ageing population can be covered in the future by the (then) working population, and to maintain full employment as far as possible for locals.
Study those demographic figures. They are not fiction or scaremongering. They are reliable and actuarially-calculated figures. We ignore them at our peril.
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Anon 2. I don’t see myself as a “whiner”. I simply disagree with your point that “capitalism is there to do what you wish”. I believe that it is there for the few to abuse as they wish.
Of course, lots of people enjoy relative affluence, but many, here on this island, suffer relative poverty. Many people earn enough to survive in our society (and the cost of living here is such that many do just that – survive), but there are a few who really do know how to play the system – or can afford to employ advisors to work that out for them…I don’t believe that it is right to live in a community and enjoy its benefits without a proportional contribution to that comuunity.
I absolutely agree that Guernsey needs to diversify industry, but why is it necessary to reduce the tax cap to do that?
As I said earlier, in an island with full employment, why try to create more jobs when we don’t have the capacity to fill them? Or do we attract more wealthy entrepreneurs whoc an set up diverse business interests then abolish zero-10 and relieve ourselves of the finance industry?
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David your post at 10:30 a.m. missed the point. I was not denying that there is a projected demographic problem. The Billet article argued for a population increase to mitigate the problem. When read carefully, it becomes clear, as I said before, that the proposed solution makes no significant contribution to a solution to the problem.
It is a case of the solution being far, far worse than the problem.
It might be interesting to see what effect the proposed population increase would have on the island demography in the future. I have not re-read the Billet article, but I think it was silent on this point.
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David
The market fails. Nothing more, nothing less. It is distorted to benefit the few.
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Papillon thanks and understood. Sorry for the confusion. You are quite right in that a far more detailed and exhaustive study, warts and all, into the real effects of an extra x thousand people in Guernsey has to be undertaken. That can then be measured against the projected cost of not allowing new immigration.
Lawrence what are you talking about ? Has the Guernsey “market” failed ?
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Lawrence
I think it’s you who may have missed the point entirely
I believe Deputy Parkinson’s proposed tax ‘cap’ of 100K refers to the maximum amount of tax that a person should have to pay into the tax pot NOT your apparent interpretation that any income above 100K should be free of tax
At a straight 20% tax rate and ignoring his allowances your 500K decision maker will be paying 100K tax anyway.Surely that is more than sufficient to cover whatever public services he uses
Never mind,Belinda has the solution
Get rid of all the wealthy entrepreneurs and make up the lost revenue by growing your own vegetables
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Belinda, apologies if I implied that you were a whiner. I suppose my gripe with a part of this society is that their obtuse view of the government is that the government are soley there to house, water, feed and cloth them, when really – they should be providing the facility to be able to do it for themselves. Here in guernsey we have those facilities in abundance. As you mentioned the job market is at capacity. I interpret that; as the job market is there to serve your wishes and needs. The public have the power to make of it what they wish. If they barely “survive”, there is the facility to go out into the job market and do something about it.
I read the article in the Financial times, to which this article is based on. Derek Coates makes a very good point about the housing licences – The theory is that the five-year timespan allows the company to train a local person to do the job! – this to me shows a perfect facility to which to work and train and ultimately provide a vessel to live a little more comfortably. Why should this type of ambition be percievd as a chor/hard work? I beleive many people either shy away from this type of hard work or are too dismissive of opportunity. To live a little more affluently comfort barriers have to be pushed, minor sacrifice has to be made, its not all rosey. This then brings me back to my original point, expecting the government to do it for them when they do not like barriers pushed! If anything the government may sometimes make it a little too comfortable for barriers to be pushed.
On your final point an interesting view. Could we put this down to the evolution of the market place? Is it such a bad thing that we may, disolve our dependancy on the finance market? Would that be so bad given the dramatic financial scenarios the world markets are going through at the moment?
Finally – The pure nature of the capitalist market is based on doing something to gain something (profit,wealth,etc.). Why lower the tax band?…….incentives.
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Anon 2- thanks for your comments. Perhaps we are not so far removed after all. Whilst I fully respect your idea that people should aspire to “better themselves”, we still need people to clean the toilets, sweep the streets, and pick our vegetables and those jobs will never attract huge salaries. And are huge salaries the be all and end all? I would say no. I know people here who admit to having more money than they know what to do with.
You can’t have everyone sitting on the top of the pyramid. It will never ever happen. We have to accept that there will always be people who cannot rise to the heady heights of the most affluent and that those who do should take some social responsibility.
I am not saying that aspirations are bad, and nor am I saying that wealth is inherently bad. But I would argue that increased wealth should result in increased responsibility.
As my earnings increase, I fully expect to continue to contribute proportionally (through both income tax and social security) to the community in which I live. It’s called being a citizen. Part of a community.
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Belinda, I agree with your comments regarding the service industry. Having had a small amount of expeience of the Hotel industry, alot of the jobs needed in this indusrty are also low skilled and low paid. The majority of which are filled by eastern European workers, before them it was the Potuguese and before them it was Germans,italians etc. I know alot of these current workers purely want to earn money so that they can supply their family back where they live, they hardly ever intend to use guernsey as a final home. I can’t see why these workers cannot supply 2 functions supplying the labour we need to fill jobs in the service industry and providing a vessel for ethem to live a little more comfortably back at home. (all beit not ideal exploiting these workers though the money they earn usually goes alot further back where they are from – there will always be this type of worker).
With this in mind it frees up local workers to be able to aspire to jobs with better earning capabilities, which, thanks to the housing licence system, will always benefit local works with that opportunity to get a better job.
If more locals are in permanent beter paid jobs, contributions in Income tax and social security will also go up, catering for those who cannot reach the “heady heights”. Thankfully inflation is affected by alot of external factors meaning that it wouldn’t spiral, but it would increase a little…
Obviously not everyone can be at the top a the pyramid, that is impossible. However this should not diminsh aspiration. Even if you were part of the pyramid (community) you should be able to see and aim for the top and would be on a more competitive salary doing so.
I beleive that Deputy Parkinsons move is alot to do with aspiration. I just hope there are more bold moves like this in the future. People will always look at the surface of such moves and judge. However, if you pick at the layers, i think we could all see that moves like this are the start of something bigger.
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I absolutely love this debate! Just a few notes to those ‘tax the rich – give it to the poor’ folk! Already been tried I am afraid…its known as Utilitarianism and is defined as the idea that economic efficiency only occurs when equality in income is granted. Can Guernsey do this? Please note we are actually talking about transferring income from the rich to the poor. (Like Labour did in the 1970s in the UK…just before they got bailed out by the IMF).
Well let’s see – who is going to work harder if they are going to get taxed to the point of the benefit to them being the same? “So Mr States I work harder for no extra or marginal reward?” Errr…that would be no one then.
Who is going to arrange for the income to be transferred from the Rich to Poor? “Tax inspectors, accountants, administrators, banks all give their services for free right?” Errr….no they don’t. So by taxing the rich £1 more, we increase the marginal cost of them being taxed (i.e. make them like tax less disproportionately – keep up with me here) and reduce the marginal benefit of income transfer to the poor (i.e. the net effect is it hurts the rich far more than the poor benefit from it).
The Guernsey prosperous economy is based on the symmetry principle – or rather these two rules:
1) The law must respect private property
2) Any transfer of private property must be voluntary
So by banging on about the rich you want to turn us into a state where the private property of rich people is not respected and such private property is involuntarily transferred to the poor. You should join this guy’s gang….
“All private property is theft”
Vladimir Illych Ullyanov (LENIN)
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Licence holder
Who has claimed there should be equality of income?
The rest of the economic theory lesson provided ny Licence Holder reminds me of what my Economics professor told me on graduating – “Now you can begin to learn the reality of economics”
Seems the advice applies over 40 years later.
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Echoing Stephen John – Licence Holder – I cannot find a single suggestion here that all income should be equal. It makes the rest of your diatribe meaningless.
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Not only that Licence Holder, do you not mean Egalitarianism? Utalitarianism is something different posited by Epicurus through Bentham and then the Mills.
So your point is that no one has said anything about egalitarianism. Good work all round.
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re: Lawrence – no I meant Utilitarianism (Look it up) – Egalitarianism is something completely different. If you want a good overview of a modernist Utilitarian perspective, check out ‘A Theory of Justice’ by John Rawls (Harvard 1971) – I think you may be getting your -itarianism’s mixed up.
Note to Belinda and Stephen: Apologies for thinking you actually meant equality of income. It would seem that what I was actually getting at is something prescribed by Nozick in 1974. I mean’t that in any society, the economic interest of a community is governed by the trade off between the Marginal Social Benefit to market participants and the Marginal Social Cost to us all (Stephen – remember that the market decides who the burden of taxes is levied on – not government).
As such, we can either make the final result fair – which is what I thought you were getting at Belinda (apologies); or you can make the rules fair (i.e. my last post). As such, if we don’t want equalities of income (the final result option) then we come back to the point made as follows:
1) The law must respect private property
2) Any transfer of private property must be voluntary
As such, the market, without government intervention, will move those less fortunate out of the market – namely Belinda’s locals. The use of housing licences artificially shifts the MSB curve for labour (also known as the demand curve) – leading to an allocative inefficiency in the economy for such Labour. Unless we want to ‘replace’ non-productive locals with those from the UK, which I am not suggesting, compromises in the economy need to be made.
As for your comment Stephen, interesting that economics ended for you before most of what I typed was published – for a quick primer read, ‘Anarchy, State and Utopia’ Nozick, R. (1974). I look forward to your response when you have read it.
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If we were to follow the philosophical nature of Nozick to their natural conclusions the world would be a bitter and divided entity. Libertarianism is what has ruined the global finance system. Small state theories end up promoting vigilantism, self regulation, and distorted power based on wealth and armament. Using such an extreme model for Guernsey would be as disasterous as collectivism.
There is no doubt that Guernsey needs the rich and powerful, but not at the cost of social well being. Utalitarianism also includes more general themes such as quality of life. Quality of life through rapid wealth acquisition is short term, at some point there is no more room for individual expression of wealth and it all flakes away leaving a tawdry parody of luxury.
Real quality of life is based on honesty and effort. How are we to know that Nozick’s ‘fair, transparent exchanges’ of goods to capital are indeed fair or transparent. Are Hedge Funds fair and tranparent? Are funds that invest in Big Mining or Big Oil or Big Soya to boost their NAVs fair or transparent? No, plainly not, as this exchange is ruining the lives of the majority poor in the third world. So the argument is flat.
Guernsey’s rich bankers are not dealing in ‘fair, transparent exchanges’, they are disproportionately paid as a desperate measure to keep them here. The market then distorts in their favour leaving the poor worse off, year on year.
Libertarianism is failing all around us.
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Licence Holder
I fail to see how my comment “Now you can begin to learn the reality of economics” equtes with your interpretation of it to mean “interesting that economics ended for you before most of what I typed was published”
In fact it is exactly the opposite.
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Lawrence I understand your point, but you can’t have one rule for Bankers and one rule for everyone else – my point was that the rules had to be the same for everyone. You don’t complain to Instep when they refuse to tell you their mark-up on shoes they sell – is it because they don’t make ‘obscene’ profits?
I was also talking about Utilitarianism not Libertarianism. There is a real argument that in the long-term the speculation of commodities such as Soya makes a positive impact anyway – look at the uptake in agricultural land use in Russia and Ukraine, or the significant investment across India in food processing technology. Look at cooperatives across the whole of Africa – in particular those in Burkina Faso. The fact Ethiopia has trademarked coffee brands. Should a third world country be threatened by speculators such as ‘hedge funds’, then they implement measures to prevent such speculation. Look at Thailand and Vietnam re Rice; or Brazil re Corn production – not on the news is it? This was in 2008.
Short-term supply issues are always the precursor to long-term supply fixes – the real problem facing the third world is not the actions of speculators or Hedge Funds, as much as the media wants you to think it is – it is more to do with protectionism and the World Trade Organisation. Quotas and subsidies will always distort the equillibrium price from its natural level. ‘Hedge Fund’ actually means nothing incidently – its a generic term for a vast number of vehicles.
If you want earnings related transparency for ‘rich bankers’, you need to remove the quota on them being able to settle here. Basic economics – when you impose a quota you artificially shift the MSB curve to the right, thus inflating the equillibrium price you have to pay. If you can’t remove the quota you need other measures – such as tax caps.
Stephen, Didn’t mean disrespect you with comment, just thought you would appreciate an overview of economics since Keynes and Friedman were surpassed. If you need any help I am happy to give it to you to improve understanding.
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