Tuesday, June 08, 2010

Jersey: Socialism for the Rich

Today's edition of the Jersey Evening Post carries a letter from Pat Lucas calling on the island's Chief Minister to comply with the European Union's Code of Conduct for Business Taxation without imposing harsh tax increases on poor people on the island.

This letter comes in the context of an impending EU review of the failed "zero-ten" tax policy. Zero-ten was adopted by the States of Jersey in response to EU pressure to remove harmful practices caused by 'ring-fence' arrangements that gave preferential tax treatment to non-resident businesses, without granting similar concessions to local businesses. In response to EU pressure, Frank Walker, the then chief minister of the States of Jersey, slashed corporate tax rates across the board to zero percent, precipitating the £100 million budget deficit Pat refers to in her letter.

As TJN anticipated several years ago, the likely response to the island's fiscal crisis is that the goods and services tax (GST) will be increased from 3 percent to around 12 percent. This will have an immediate and regressive impact on household budgets for Jersey's many low paid families and pensioners. An already very unequal society is about to become a whole sight more unequal. As Pat says in her letter:

"...we in Jersey already pay extortionately high prices for housing and the overall cost of living is far higher than in the UK, despite the 17.5 per cent VAT rate on most goods and services in the UK.

Ordinary people have to pay a very high price indeed for the pleasure of living in a tax haven, and the price will be very much higher, once the GST rate is raised to tackle the budget deficit. GST is a deeply regressive tax. No amount of Social Security will rectify this. It simply means that the rich will get richer and the poor, poorer."

In so many respects, Jersey represents a microcosm of the economic and political crisis now impacting much of the rest of the world. Having slavishly followed the ideology of the neo-liberal right, Jersey now finds itself with a parasitic economy that doesn't create real wealth, a society that is grotesquely unequal, and a political class that is entirely captive to the special interests of rich and powerful people. Its tax system reflects these interests.

It is very unlikely that chief minister Terry le Sueur and his council of ministers will pay heed to voices such as Pat Lucas and those who call for social and economic justice. Having failed in their past attempts to wriggle round the Code of Conduct while still protecting the tax haven industry, they are far more likely now to raise taxes on local people in order to protect the interests of the bankers, lawyers and tax cheats who control the island.

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