Saturday 23 August 2008

GST, Food and the Devil's Bargain

http://www.thisisjersey.com/2008/08/23/ministers-back-down-on-prices/

Ministers back down on prices By Ben Quérée
MINISTERS have been forced into an embarrassing U-turn on GST exemptions. Faced by the prospect of a defeat in the States over exempting food just weeks before the elections, they have agreed to mirror the UK system of exempting non-luxury food items from the 3% sales tax.

http://news.bbc.co.uk/1/hi/world/europe/jersey/7576431.stm

People living in Jersey will no longer be charged the goods and services tax (GST) on food in future. The Council of Ministers has decided to scrap the 3% tax on food from next spring because of increasing prices.

http://www5.channelonline.tv/news/templates/cinews2.aspx?articleid=16160&zoneid=2

GST on food in Jersey is to be scrapped. The Chief Minister, Senator Frank Walker, made the announcement this morning. It followed an emergency Council of Ministers meeting yesterday. .. GST was introduced in May and the levying of the three per cent tax on food was opposed by a number of States members. But the Chief Minister denied this morning's announcement amounted to a climb-down. Senator Frank Walker told Channel Online: "This is a positive and appropriate reaction to absolutely unprecedented increases in food and fuel costs. "It's no climb-down at all, the decision to keep GST at the lowest possible level and as simple as possible, as endorsed by the States on more than one occasion, was the right one at the time, but what we've done, while other governments talk about the increases in food and fuel costs that are international, they don't just apply to Jersey, we've reacted."

At first sight, a reading of the JEP article suggests that there are two kinds of food - "luxury" and "non-luxury", rather than the impression given by the other news stories that all food is "a non-luxury item" - in other words the kind of distinction made by Freddie Cohen, when he was suggesting GST would be taken off "healthy food". But the official statement at the Chief Ministers site does say "zero rating GST on food", so that is clear, despite the JEP saying "essential foodstuffs" and "non-luxury food items", which is terribly ambiguous, especially after Freddie Cohen's earlier suggestion.

(http://www.gov.je/ChiefMinister/News/CouncilofMinisters+responseto+foodandfuelpricerises.htm)

There is a sting in the tail, though, and that is the official statement about GST being brought in "at the lowest possible level and as simple as possible". Note the "at the lowest possible level". Now that it is off food, what remains of the devil's bargain that it would remain at 3% for the next five years, as that seemed to be the bargaining counter by the Council of Ministers when it was introduced without exemptions.

It is also not off food until next April, giving plenty of time for another U-turn, once the new States are firmly under a new Chief Minister, who will therefore be able to re-assess the situation. The statement is giving them all a good "breathing space" so that it is not an election issue, but there is plenty of time for other considerations to be made.

Another question - will we now see GST on the till, as a separate total for till receipts from retail outlets? If there is no way of assessing which are GST at 3% and which are zero rated, then if a business is registered for GST, and buying food and non-food items, how will it know what the GST element is? At the moment, it is simple to calculate back on the total to get the net and GST parts, because all items at a retail outlet have GST applied. But if that is no longer the case, we are going to need to see the GST element separately on till receipts, even if they are giving items marked at gross. It will therefore be possible to calculate how much is added by rounding differences over an "add GST at the till" alternative.

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