Taxes that hit the poor

Monday 9th November 2009, 3:00PM GMT.

From William Emslie.
I’M a Jerseyman currently enjoying a tour of the UK, working as a street entertainer and jobbing musician.

It’s a precarious existence financially (though not one I would care to swap for the security of a regular job at present), and so the issues facing those living on low incomes are high on my agenda at the moment.

Catching up with the local news on the This Is Jersey website, I was astounded by Philip Ozouf’s proposals for the 2010 Jersey Budget.

Firstly, he intends freezing yet again the income tax threshold. By my calculations, this means that anyone working full-time (40 hours a week) on the minimum wage will now have to pay tax.

Has Senator Ozouf any idea what a struggle it is to survive in Jersey on under £250 a week? Has it not crossed his mind that instead of drawing more low-earners into the income tax system, those who can afford it could be asked to pay a little more?

Then there are his proposals for more regressive taxation: increases of up to ten per cent on the duty on alcohol, tobacco and fuel. The fuel, I note, is that which the poor use in their cars to get to work and earn their six quid an hour, not the stuff the rich put in their cabin cruisers for a day out in France, but that’s another story.

I accept that alcohol and tobacco are luxury items and that those in the income bracket I’m talking about can rarely afford more than the odd tinnie of 8.6 in the Parade in any case. What worries me is that in talking about ‘increasing duty to UK levels’ Senator Ozouf seems completely out of touch with the current cost of living in Jersey.

So, in case he hasn’t noticed, I’ll spell it out for him: the days when Jersey was a cheap place for fags and booze are over.

To illustrate, last night in York (by no means the cheapest city in the UK) I visited a pub and enjoyed several pints of excellent cask-conditioned bitter at £1.69 each. In Jersey, were the product available, it would cost at least £2.60. Here, a pint of premium lager is around £2.50 a pint. In Jersey it’s £3.20.

The price of spirits in pubs and off-licences in the UK is between 10 and 50 per cent lower than in Jersey. Give or take 10p, the price of tobacco is pretty much the same on both sides of the Ecréhous.

For me, though, the real issue is that for those on middle to high incomes, inflation-busting increases on duty are merely an annoyance.

Those who feel the pinch are, once more, those on low incomes, struggling to make ends meet. The ones who will again be subject to additional tax burdens, paying the transitional 27 per cent rate on their meagre taxable wages, while those on high incomes continue to pay their 20 per cent flat rate.

Of course, this is nothing we should not expect from one of Senator Ozouf’s political persuasion. What I will be watching is the commitment of those States Members who claim to represent the common people to challenging this policy of taxing the poor and going easy on the rich.

I and my vote will be back in Jersey before the next election.

1
bella

November 9, 2009 at 3:19 pm

This is what we have been protesting about for a long time.
But no-one listens,or don,t want to.
The very people who need help are not getting it.
The high cost of living is now putting many on the breadline and now they want to tax them.
Thank you William for confirming the difference between prices in uk and jersey.

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2
JERSEYBEAN

November 9, 2009 at 3:38 pm

So now we know.jersey is now a place only for the rich.the working man/woman does not have a hope of a decent lifestyle,tax,tax,tax,that is all we ever hear now.we must all vote this lot out,and the sooner the better,this little island is finished for the ordinary person.god help us,as this goverment won’t.

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3
Adrian

November 9, 2009 at 5:10 pm

I perceive it as the government, big business and the rich versus the rest, and have done so for quite some time now.

I too have noticed prices in the UK with its high VAT level is still less than in Jersey. It used to be the other way around.

If people want things to improve they need to elect those who have a clear election manifesto to help the majority and who also walk the walk, not those who change their tune once elected.

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4
Michael Neal

November 9, 2009 at 9:29 pm

With the greatest respect of Mr Emslie, it is clear from his letter that he doesn’t understand how Jersey personal tax works.

The best way to understand Jersey personal tax is to look at it as two separate tax systems:

* The marginal tax rate, where a large amount of a taxpayer’s income (currently around £12k) is tax free and the rest is taxed at 27 per cent. This tax-free income is known as the taxpayer’s ‘threshold’.

* The standard rate of tax, where a much smaller amount is tax free but the rest is taxed at 20 per cent. The tax-free income is known as the taxpayer’s ‘allowances’.

Taxpayers are assessed using both systems and the tax due is always the lower of the two. So, a low earner will pay the marginal rate of tax because his taxable income will not be that much higher than the threshold and so it does not matter that he is being taxed at 27 rather than 20 per cent. In contrast, a higher earner will pay the standard rate of tax because his income will be much higher than the threshold and so his tax liability is lower if he pays 20 rather than 27 per cent on this larger amount of income.

Complicating this is ’20 means 20′, where all allowances under the standard rate of tax are being phased out. Not all allowances are affected for standard rate taxpayers, who will continue to receive tax deductions for pension contributions and some other expenses as well as child allowance.

For marginal rate taxpayers, 20 means 20 does not apply and they will continue to enjoy mortgage interest relief on their main residence, etc. In fact, 20 means 20 benefits marginal rate taxpayers because thresholds are increasing.

Mr Emslie is therefore completely wrong. Senator Ozouf hasn’t frozen thresholds for low income, marginal rate taxpayers. He has frozen allowances for better off, standard rate taxpayers. However, since the allowances were reducing under 20 means 20, this actually reduces people’s tax burden.

Also, the tax thresholds (the amount of income before which a low income, marginal rate taxpayer starts to pay tax) have increased, so fewer lower income people will be taxed as a result of the budget.

Hopefully the above makes some kind of sense!

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5
Mistershifter

November 10, 2009 at 8:15 am

With the greatest respect to No.4, you have missed the point 100% It doesn’t matter how you dress up, re-adjust or view the figures, numbers or whatever the fact remains. The cost of living in Jersey is much higher than the UK, and things are getting worse in what is supposed to be a tax free island. End of.

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6
joker

November 10, 2009 at 1:49 pm

Mistershifter

With greatest respect not only have you missed the point of No.4′s excellent post you missed the point of the letter as well. Typically, some have taken the letter out of context and highjacked it to promote their anti establishment agenda. Fact is no one is disputing that a lot of basket goods are more expensive here than the UK, the same way no one can dispute that some are cheaper. This letter is about tax and how the increases in tax will affect the poor on the Island. Therefore Michael Neal’s response is about the fact that there are no tax increases for the less well off and therefore the letter is wrong. Hijacking the letter to promote talk about the high cost of living being a result of the establishment is also wrong. Jersey is still a low tax economy. To say otherwise shows lack of research on the subject.

Note the duty items in the letter. I believe all but spirit duties are cheaper here in Jersey. That means people cannot point their finger at Ozouf etc. The people you need to ask is the retailers. But looking deeper into economics perhaps they’re not all to blame either; Jersey is a small Island that cannot take advantages of economies of scale UK chains can. Not only that prices are at the levels they are because of demand. Like everywhere else Jersey has the ‘haves’ and the ‘have nots’. Fortunately we are mostly haves and the proof of this is in the high cost of living which is dictated by demand of the Islands people. If people couldn’t afford these prices then there would be no demand and prices would fall. Who’s to blame for that other than the consumer themselves?

Taking it further, you have to ask why Ozouf made the decisions he did. The answer is because States spending is out of control, not Ozouf’s fault as he didn’t vote to increase the budget for nice to have schemes like the Town Park and other follies. The good news in all this for the less well off is that the middle earners are the ones affected by tax increases the most. With less money in their pockets demand will reduce as will prices.

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7
Michael Neal

November 10, 2009 at 2:25 pm

#5 Mistershifter

With equal respect, I did not comment on cost of living and I certainly didn’t ‘dress up’ or ‘re-adjust’ anything. Nearly everything Mr Emslie said about tax is wrong. End of.

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