States of Guernsey throws out income tax rise but paves way for Goods and Services Tax

Guernsey politicians have thrown out the island's proposed 2p in the pound rise in income tax as part of the 2025 Budget but have agreed to make plans for a Goods and Services Tax (GST) in 2027.

The decision followed four days of deputies debating 22 amendments to the Budget to try and plug a £100 million shortfall in funding.

Deputies have since debated whether to introduce the previously planned 2% increase on income tax, or - for the fourth time this political term - debate the introduction of a 5% goods and services tax to the island.One budget amendment, originally voted through by deputies, suggested a hybrid approach where income tax would have risen by 2% for two years until 2027, at which point GST would replace it. In the end, deputies voted tonight (8 November) not to increase income tax, creating uncertainty over the future of Guernsey's long-term finances.

In setting out his Budget proposals, the President of Policy and Resources, Deputy Lyndon Trott was clear that the proposed increase in income tax of two pence in the pound was not a long term solution.

However, he warned that without the estimated £34 million pounds of extra revenue, the next States will find itself firefighting resources which are under increasing pressure from the ageing demographic.

He explained: "The irony is that if GST is considered the answer in future, it’s very likely that the introduction rate will be much higher than it’s currently proposed because of the requirement to play catch up with the damage that we’ve done to public finances."

The Committee for Policy & Resources will now have to consult on an emergency budget to reevaluate spending plans and consider cuts as well as other possible tax increases.

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