‘Do you want to drive out the wealthy?’
Tuesday 28th July 2009, 1:00PM BST.
RICH people could be driven from the island under a proposal going before the States tomorrow, according to Social Security.
Minister Mark Dorey (pictured) said an attempt to raise more money by making contributions entirely earnings-related could cost more than it made.
An amendment from Deputy Rhoderick Matthews’ states that from 1 January 2010, the upper earnings or upper income limit for employed, self-employed and non-employed people, including those over 65, should be removed.
That would see those people earning more than the current limit of £69,108 paying a sum linked to their income.
The limit for employers for 2009 is £115,128. t would mean an individual earning £1m. per year would pay contributions of around £100,000.
While in theory it would bring extra revenue, Social Security is worried that it would encourage the super rich to move elsewhere.
‘The people on higher earnings would probably say Guernsey is not where I want to work now,’ he said. ‘And they bring a lot of wealth into the community.’
Deputy Dorey said he would reject the Matthews amendment without hesitation.
‘Economically, it would be a big mistake not to have a cap,’ he said. ‘If you removed the cap it would be a massive impact to those people – I am sure about that. Humans are such that they only take so much and a shock like that would cause irrational behaviour.’
Deputy Dorey said such a move could reduce Guernsey’s attractiveness.
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I think it could be a good thing, why do we need the super rich over here anyway? All they’re doing is milking the tax, if they move, they obviously do not like the island, and are here simply to get more money than they need.
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The answer to the question in the headline is YES, if the wealthy are not prepared to pay their way and support the community that they have chosen to live in.
The island is short of money and we have residents who can afford to pay more – what is wrong with that?
How can it be right, Mr Dorey, that a lower paid manual worker pays more of his salary in percentage terms to the Social Security Fund than a higher paid bank executive or entrepreneur? If you can justify this, lets see your reasoning in print.
It really is time we got a grip, stopped pussy footing around these people and asked them to pay according to their means. If they don’t want to, they can go, but I am sure that even by removing the contribution cap they will still be better off than in some other jurisdictions.
They want to live here, and they should contribute and help to dig the island out of the current financial mess.
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Yeah i hope all these rich people up and leave the island.
We don’t need the taxes they pay., or the companies that they work for who contribute to the island economy.
We definitly don’t want them spending their hard earned money in our shops or eating out at our restaraunts and bars.
Increasing ss contributions may or may not be the right thing to do but anyone who comments on this site and says that they should all leave needs their head examined
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Let’s not forget that these wealthy individuals probably already contribute via income tax, plus the plethora of stealth taxes that we all endure and the currently capped social security payments, it’s hardly as if they are getting away with anything as the previous posters suggest.
We also need to consider the impact that these wealthy individuals have on the wider economy (where they shop, eat drink and drive) and their contribution to job creation etc…the wealthy are mobile and can quite easily pick up their businesses, investments, spending power etc and set up shop elsewhere.
For once I think Minister Dorey has a fair point….better that they are here, contributing something that we can all benefit from than they are somewhere else and our pot is empty.
The ability to pay is an extremely important principle, but it is also just as important to set an appropriate level of charges for the services rendered.
Lets enjoy our golden eggs everyday rather than devouring the Goose in a one off binge of fiscal insanity!
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Frank you can’t just think of things in percentage terms.
Lets take some numbers (rough and made up)
A claimant from the system receives £10k pa
An average employed person contributes £5k pa
A wealthy employee contributes £65k
You need 2 average employees to support someone claiming un-employment or whatever other benefit. A wealthy employee’s contribution supports 6.5 people claiming.
The above are completely made up numbers for illustration.
If these wealthy employees leave the Island, what does the Island gain? — Higher cost to the lower earners !! Because overall taxation / SS has to be increased to meet the demeands being placed on it.
Now the above isn’t palatable to social ideaologists but it is unfortunately the reality of the world we live in. If I can buy a product for £100 at a shop or for £50 at the shop next door, where do you think I am going to buy it from? and which shop is going to go out of business ?
PS … im not rich
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not only should the social insurance cap be removed but the cap on income tax.all we want is afair system which is not the case at the moment,if you earn 20,000 ayear you pay your tax and insurance on that ,but a person who earns 400,000 only pays up to 69,000 for insurance and up to 200,ooo is taxable income.so though in actual amounts they gain more from the wealthy person its the person with less that contributes a greater percentage and has the more to lose.as guernsey is running out of money it would be best for all to have atotally fair system.
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Frank,
The lower paid manual worker who contributes a higher percentage of their gross salary will be zero pounds and zero pence – because he wont have a job as the money that funds his manual trade has dried up and moved away. They will then need to claim benefit end up costing more than he ever put in.
wake up!
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Surely the answer lies somewhere between the two extremes. Logically the earnings cap for employee contributions should be raised to the same level as the cap for employer contributions (from £69k to £111k), but both should remain capped otherwise they become nothing other than an effective rise in the rate of taxation. Is anybody going to leave Guernsey for the sake of paying an extra £2,000 to £3,000 per annum ? No. But if the upper limit is uncapped then that starts to be a different matter altogether.
We must remember that Social Insurance is not a tax. Its a fund to finance state pensions and other benefits. If upper earners need to pay more in order to keep the retirement age at 65 then that’s reasonable. If it becomes a dressed-up form of income tax then that’s not so reasonable.
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Paul,
I would class a totally fair system as; you get out what you put in. You know the majority of people in the upper earnings bracket have earned it, through hard work, education, qualifications and taking risk. So when they are not working they have satifactory compensation based on the level of there efforts.
Obviously every one pays taxes and I have no quames about that. The services are then there for all to use. However, upper earnes then have private funded medical cover, they send their kids to private school, all of a sudden they become much less of a burden on society then those who choose not to put so much effort in. In addition to the income taxes and social insurance contributions upper earners get taxed on all their considerable expenditure, a more expensive car, more dining out etc, money that is plowed into the local economy, so inadvertently funding the island income more so! Actually the current system seems unfair in the opposite manor than you are suggesting.
I am not sure of the exact figure, however I believe that only 4% of islanders earn over £69K yet no doubt contribute 15% of income gained from the abive taxes, though they probably need about 50% les of the services used by lower and middle earners provided by the island. And you are happy for this funding to dry up?????
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The ‘wealthy’ do pay considerably more, to argue not in % terms quite frankly is a pathetic argument. Why should those who generate the wealth for all in this island be made to feel as if they should be ashamed of thier success and keep baling out the island and those who won’t help themselves. Everyone has a moral right to provide for their own pensions, start with the civil service golden pensions, stop those and we might just might feel that others should contribute more.
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David,
Your latest post has prompted me to advise of an amendment I am moving at this week’s States meeting.
My amendment would increase the upper earnings limit on the contributions of the individual to circa £115,000 [in 2009 terms], the same limit that applies to the contributions of the employer.
My amendment would bring this change into effect from 1st January 2010.
This would allow a portion of the grant from general revenue to Social Security to be clawed back over the next four years. It represents a saving to States general revenue of just over £10m.
From 2014, the additional contribution income generated by equalising the upper earnings limits would be one of the measures necessary to secure the long-term sustainability of the island’s pension fund.
Matt Fallaize
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Isn’t that’s what’s called a progressive tax system based on an individual’s ability to pay? Social Security is a tax let’s make no mistake about this. Places like the Channel Islands have a funny attitude to this. Why not go down the UK route and have a different rate for earnings above a certain amount, say 1%? Not unreasonable.
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Some people keep using the percentage of pay analogy to suggest the more well off are contributing a lower percentage of their income in tax or social security. Well if you earn say 25k then assuming 8.5k personal allowance your effective tax rate will be 13.2%. If you earn 60k and have the same allowance your effective tax rate is 17.2%. So that means the more well off are paying a higher tax rate.
As regards social security, everyone is entitled to the same benefits so if you earn 25k you will pay say £1300 a year for the various benefits and if you earn 60k you will pay over £3000 a year for the same benefits.
So those who seem to think the more well off being subsidised by the lower paid should think again.
To remove the upper earnings limit would effectively mean the tax rate has been increased to over 25% and this can’t be disguised any other way. I doubt many will be driven away by increasing the upper limit to a degree but tax rises should only come after cost savings have been made by the States.
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Ah, David, back to considered, insightful comments worthy of proper debate. I’m relieved ;-)
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It is a rather silly question: I do believe that in our hearts we want rid of these leeches.
Not only because they take up room in the Island; or their rather stupid ways of thinking they’re the cats whiskers, with their arrogant ways
But because they are doing their own country out of taxes sorely needed in the UK-
I haven’t much till overs for the UK, but I do like fairplay and they are not playing fair.
So, get rid of them. less talk more walk-
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Yes Yes Yes, get rid of them, they are making an eyesore of Guernsey, with all thier expensive updates, Cynthia Hyam-Mooney
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I agree with David and Carts.
Although I’m neither rich, or a great supporter of the rich, I would rather they contribute something to the public purse than up, leave and stop contributing. Like it or not, the rich man’s taxes help support the high quality of public service we receive here.
Oh – and yes you read it correctly – high quality of public services. Us Guerns may complain and our public services have many faults however I’d rather live in our system than the majority of other places in the world.
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It is quite clear that the wealthy only like Guernsey for the tax perks.
Is that something to be proud of?
So we have a bunch of rich people that despise our elderly, that want to actively run down public services and who want to tax the middle earners into an early grave.
For whom is Guernsey being run?
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Thanks Jonny, I am awake.
If you read my comments properly (I think you may have missed the word “if” in the first line), I do not advocate that all rich people leave Guernsey now. My point is that if people can afford to contribute more, then they should, and they will then be valuable and welcome island residents.
Our social security system needs extra funding, and we have the solution to this problem already here.
I am not so blinkered that I cannot see their money is very important to the island economy. However, if the disposable income of higher earners were reduced a little, I am sure that the majority would not suffer too much, neither would the island economy and it’s highly unlikely that any would up and leave.
My main concern is that low earners are disadvantaged under the current system. Maybe total removal of the cap would be a bit extreme, but it should definitely be revised.
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Eric
Unless I’m misreading your posts, you seem to be inferring that all high earners are non-local. Why on earth do you think that ?
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Arnald
Was waiting for you on this one ;)
Completely agree.
But the answer to your question is obvious, god forbid they pay more eh??
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either you diliberately wish to raise a point, or you have in haste mis-read my post.
I state; and I think clearly; that those I chose to refer too were in fact damaging their OWN country The UK.
Now wasn’t that clear enough.
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Eric
Its clear now who you were referring to, but was by no means clear in your original posting. So you don’t like those from the UK who have come here ? Your choice and your opinion.
But this thread is about high-earners and social security caps, not about where people come from. I repeat that you seem to be saying that the high-earners referred to by Deputy Dorey are only from the UK, whereas I’m saying that there are many locally-born and locally-raised high-earners who are at least as effected by these proposals. It isn’t just your unwelcome incomers from the UK who are affected.
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paul (lowercase) – you seem to have misunderstood the income tax cap. It is not a cap on the amount of taxable income, it is a cap on the amount of tax payable. In order for the cap to kick in you would have to be earning £1,250,000. There are probably only a handful of people affected by that cap and I assume that the view has been taken that the island would rather receive £250,000 in tax from these people than see them leave.
As for SS, it must be remembered that this is not intended to be an income tax. There is a debate to be had as to whether income tax is at the right level for the sustainable future of this island but let’s be honest about it and talk about the income tax rate instead of trying to turn SS into an income tax by the back door.
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David:
I just cannot say anything about the local people who became rich.
I did so a long time ago, in fact very soon after the war;
People who were on the verge of bankruptcy, were miraculously after the war very rich.
But they were good men: I was told, so were they who stole the widow’s mite.
however it isn’t at individuals that I complain about but the method they use, and to do that they have to come to our Island;
And they are encouraged by a ruling body who care less about the Island rhat was so beautiful .
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Yes for sure, The sooner the better. Guernsey was a far better place before the finance industry!!!! We may find it initially hard but it would definately be for the best!
A La Perchoine, mon vieux
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There is nothing more distasteful than a politician defending the perks of the rich.
The argument about tax receipts is irrelevent compared to the moral necessity of social responsibility.
The first to leave should be pilloried and shamed.
The rest of you are simply short sighted to protect the greed of the few.
When even the Dean can defend the actions of the finance industry, you know that Guernsey is sinking.
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Arnald:
Nothing strange about the Dean’s attitude: there is a big building named after another of those Deans.
People either don’t know or memories are short: but I remember those war years.
I very much doubt if he was allowed through the pearly gates.
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“We may find it initially hard but it would definately be for the best!”
Speak for yourself.
As someone who caught the last years of the growing industry working grids, pans, for most of the Dutch growers and some of the locals the work was tough and crap.
This whole view of the ‘way we were’ usually involves reasonably well off growers reminiscing about their 200ft of glass in the back of their Constablesque Guernsey cottage. Sorry to bust your bubbles folks but not everyone owned spans and their own homes.
Don’t get me wrong I don’t touch the robes or doff caps at every passing finance worker. But to suggest Guernsey would be better off if the finance industry suddenly left is verging on the insane.
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Kick out the RICH;then what?
Who provides sponsorships for the many cultural and sporting activities in Guernsey?
Who provides employment for gardening services, builders,plumbers and other tradesmen ?
Who pays exhorbitant prices to shopkeepers some of whom apply excessive markups to their goods?
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Of course ‘kicking out the rich’ is not an option, that would be absurd. The fact is that politicians should be looking to do the best for all of us all of the time. If the belief is that the rich should be subsidised by our laws that enable them to minimise their social contribution and that circumstance benefits the majority, then that’s fair enough.
Somehow I doubt it though. A few percent on income tax would not hurt and that is what is so childish about these claims of being ‘driven out’.
Are these people really stressing about where the next meal is coming from? Do they stress about the next month’s repayment? About going to the doctors because they can’t afford insurance? About how they’re going to survive once they retire?
Because by claiming they cannot possibly be asked to pay a bit more that is what they are suggesting the rest of us do. The rest of us can’t afford it, they can.
If they want our general standard of living to go down, more social illness, even homelessness, then what does that really say?
Believing that ‘the rich’ employ vast swathes of our population is nonsense. Just basic living employs our tradesman and shopkeepers, the rich just demand more choice of luxury, pushing prices up for everyone. Let’s not be fooled, the UK’s wealth gap is widening as a direct result of the culture surrounding finance. There are more and more social issues rearing up (in fairness to the present government, they are reporting to a much higher standard than ever) and more and more realisation that we all have to pull together a bit.
So no, let’s not drive out the rich, but let’s hope they understand some basic human cooperation and responsibility.
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Increasing ss contributions may or may not be the right thing to do but anyone who comments on this site and says that they should all leave needs their head examined
insurance
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