If the former US Vice President Dick Cheney is to be believed,
"people don‟t give a damn about tax reform". This
is unlikely, however, to be true of the Treasury Minister‟s
recently published Property Tax Review Green Paper. Given the range
and importance of the review for Jersey households and players in
the local property industry, the public consultation is open to
responses until the end of 2014.
The Green Paper, which draws upon a review prepared for the
Minister by PwC LLP, stresses that the purpose of the review is not
to raise additional revenue. It is about putting the property tax
system on a sound footing by identifying principles to help shape
development of a modern, efficient, coherent property tax
The Green Paper sets out 6 principles identified in the PwC
review to inform deliberations as to potential reforms:
Wide and transparent consultation.
Coherence and certainty - A reformed property tax system should
fit with existing taxation principles and established legal
concepts; taxes should be easy to calculate and based on
transparent and up-to-date valuations.
Support for efficiency and growth - "The choice of
property tax instruments should favour economically efficient taxes
such as recurrent taxes on land and residential property over taxes
that distort behaviour such as stamp duties."
Support for the competitive environment - Where possible,
property taxes should support and encourage inward investment.
Fairness - Taxes should be balanced in their incidence, be
based on up-to-date information, reflect the ability of taxpayers
to pay and be readily collectable.
Fiscal sustainability and sustainability - A property tax
system must be designed to improve macro-fiscal management, with
particular regard to the level of debt and dampening volatility of
Against this background, the Green Paper explores the potential
for reform in certain areas of property taxation.
ANNUAL PROPERTY TAXES
The Green Paper considers whether the current rates system could
be modernised and broadened in scope. As noted above, recurrent
property taxes are regarded as economically efficient and
furthermore support the objective of reducing volatility of tax
Various options are canvassed for both residential property and
commercial property, involving in the former case either changes to
the rates system or a new annual property tax and in the latter
case an annual property tax.
TAXING UPLIFT IN LAND VALUES
The concept here is that the public should share by means of
taxation in uplifts in property values attributable to the
performance of the economy and other factors created by the
The Green Paper considers potential options:
Taxing profits over and above the initial cost of a property as
increased to reflect a normal‟ rate of return.
Taxing development gains namely uplifts in land values based on
the grant of change of use permission or the re-zoning of the land
for the purposes of the Island Plan. It is conceded that there are
practical and technical obstacles and that "no territory that
we are aware of has ever successfully implemented a tax of this
Introducing a scheme similar to the UK Community Infrastructure
MODERNISING TAX RELIEF
Further gradual restriction of mortgage interest tax relief
(MITR) is canvassed. It is made clear, however, that neither the
abrupt withdrawal of MITR nor the restriction of MITR to current
borrowers only is being proposed.
The rules in relation to interest tax relief for commercial
landlords are also to be reviewed. A possible basis of reform would
be to prescribe in law the proportion of the gross rental of a
property on which a landlord would be required to pay tax. The
actual amount to be paid by the landlord by way of tax would then
be the greater of (a) the amount calculated under the current rules
and (b) the prescribed proportion of the gross rental.
STAMP DUTY AND LAND TRANSACTION TAX (LTT)
A full review of stamp duty and LTT is envisaged, with a view to
rationalising and modernising it. Potential reforms could
reducing rates or increasing bands;
abolishing stamp duty on mortgages; and,
introducing reliefs for transfers between connected
Studying the Green Paper and participating in the consultation
process is strongly recommended. Full details can be found on the
Consultations page of the States website (www.gov.je). The
consultation process closes on 31 December 2014 and a summary of
responses is to be published in Spring 2015, together with an
indication of how the Treasury Minister intends to proceed.
Article first published in Business Brief, September
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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