Independent Taxation Review

Scrutiny review - Corporate Services Panel

Launch date: 06/08/2021

Review status: Comments published

What is the review about?

The Minister for Treasury and Resources (the Minister) has for some time planned to introduce independent taxation for married couples and partners within civil partnerships. This is seen as a much-needed modernisation of current relevant legislation dating to 1928 which presents issues relating to sex and age discrimination. Adoption of Draft Income Tax (Amendment – Stage 1 of Independent Taxation) (Jersey) Law 202- [P.78/2021], lodged 3 August 2021 and due for debate on 14th September 2021, will potentially progress this through introduction of independent taxation for married couples and civil partners.

The States Assembly has adopted legislation that has enabled elements of the Minister’s modernisation. This included the proposition Personal Tax Reforms [P.119/2019], debated 4 February 2020, which set out reform plans such as equality in the right to access tax information and create joint and several liability. The Panel reviewed this proposition, lodging a comments paper highlighting concerns on the impact of proposed changes to lower income families and risk of joint and several liability.

Introduction of the equal right to access information by both partners in marriage or civil partnerships was adopted through the Draft Finance (2021 Budget) (Jersey) Law 202- [P.147/2020].

Further work by the Minister was envisaged to take place in 2020, however this was paused due to the impacts of COVID-19 and to allow officers to focus on reforming the Prior Year Basis (PYB) tax system and it has been stated by the Minister that the abolition of PYB will make implementation of Independent Taxation easier to achieve. 

The Minister wrote to the Panel on 1 March 2021 informing it that work to progress Independent Taxation was again “up to speed”. The Minister indicated that with the support of the Revenue Policy Development Board an allowance for those who would otherwise suffer material financial loss from the change had been identified, and that she no longer proposed to proceed with the introduction of joint and several liability provisions, instead aiming to focus efforts on the introduction of Independent Taxation.

The Minister wrote to the Panel again on 25 June 2021 outlining a planned phased approach to the introduction of Independent Taxation. The Panel was further briefed by the Minister and officers in a private meeting held 15 July 2021. This phased approach consists proposing legislation, planned to be lodged of 3 August 2021, to allow movement to the Independent Taxation regime from 1 January 2022 of those:
  • who are single,
  • who are married or in civil partnerships who confirm they are separated as at 31 December 2021, 
  • who move to the island and register with Revenue Jersey after 31 December 2021, and,
  • were “separately assessed” for their 2020 tax return and elect to move to Independent Taxation by 29 October 2021.
This first phase is predicted to include a test bed of around under 1,300 couples who elect to move to Independent Taxation having been separately assessed for their 2020 returns. This legislation will also enable a second phase to take place which will allow married or civil partnership couples to elect in 2022 to move to Independent Taxation from 1 January 2023.

A third phase will be introduced through additional legislation further to P.78/2021, this will introduce a mandatory move to Independent Taxation for all remaining taxpayers. The Minister has indicated that she desires, wherever possible, that existing married people not be financially disadvantaged by moving to Independent Taxation and will therefore introduce a “compensatory allowance”, which will potentially be phased out over a reasonable time period in order to achieve tax equity.

It is anticipated that there will be varying level of financial impact upon taxpayers in the island should P.78/2021 be adopted. The Panel will therefore undertake review of the proposition and planned implementation of Independent Taxation, specifically looking to scrutinise:
  • How will the proposed Independent Taxation system impact taxpayers, especially those on lower income, and are they equitable?
  • What will be done to ensure that decision making factors of when to switch to Independent Taxation, such as the later introduction of the compensatory allowance, are fairly communicated
  • Tax Liability of couples
  • Impact upon existing allowances, such as Child Allowance and Married Couples Allowance
  • Any additional resource requirement of Revenue Jersey
  • Changes in Revenue of the Government of Jersey
  • Has the potential impact on children been adequately assessed?



Review progress

The Panel is currently carrying out scrutiny of P.78/2021. The Panel will be holding a number of public hearings with key stakeholders and has issued a general call for evidence to gain the views of the public. The Panel would like to receive the views of the public and stakeholder on the topic, particularly: 
  • How will the proposed Independent Taxation system impact you? 
  • Do you see the proposed changes as fair? 
  • Do the proposed changes impact those on lower incomes? 
  • What information will you need to make the decision to switch to Independent Taxation? 
  • What are your thoughts on the potential impact of the Government of Jersey’s Revenue, namely a £4 million cost? 
  • Do you believe children will be impacted by the changes?
The Panel ask that any evidence is submitted by the 31st of August 2021. You can get involved through the following methods: 
  • Completing the 'Get involved' form on the States Assembly website;
  • Emailing scrutiny@gov.je;
  • By letter: Scrutiny Office, Morier House, St. Helier, JE1 1DD;
For more information, see the full call for evidence document attached at the end of this page. 

Terms of reference

1. To conduct high level scrutiny on the lodged proposition [P.78/2021] draft Income Tax (Amendment – Stage 1 Of Independent Taxation) (Jersey) Law 202- to ensure its accuracy and adequacy

2. To explore the impact of the Independent Taxation system implementation on Jersey’s Islanders, especially those from low-income households and children

3. To determine the level of public engagement carried out and required to ensure successful and fair implementation of the Independent Taxation system

4. To ascertain the future of existing tax allowances, such as the Child Allowance or Married Couples Allowance and its effect to the public

5. To clarify the treatment of the tax liability held by spouses within marriages or civil partnerships

6. To ascertain the impact of the implementation of the Independent Taxation system on the resources of Revenue Jersey

7. To highlight any loss or gain in the Government of Jersey’s revenue as a result of the implementation of the Independent Taxation system, and to consider the fiscal soundness of its introduction

8. To present a comments paper for the debate in September 2021






Call for evidence


Submissions


Transcripts

Publications

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