Guernsey business groups have called for action to support the economy following the States’ decision to introduce a goods and services tax.
The tax, known as GST, is a consumption tax applied to goods and services, similar to VAT. On Friday 2 October, deputies voted 22 to 17 to approve a wider tax reform package incorporating an initial GST rate of 3%. The decision requires measures to mitigate its impact, including income tax and social security changes and increases in pensions and benefits, to be operational before GST takes effect.
Introduction is currently expected in 2029, with a pathway to increase the rate to 4% after two years and 5% after another two years, subject to independent fiscal review.
The Confederation of Guernsey Industry and Guernsey Retail Group have raised concerns about the impact on businesses, calling for economic growth and competitiveness to be addressed alongside tax reform.
The confederation, whose 59 member firms employ approximately 1,600 people across multiple sectors, said it remained opposed to GST but accepted that the decision had now been made.
It urged deputies to use the period before implementation to get “their house” in order by reducing public spending, introducing measures to stimulate economic growth and clearing backlogs at the Revenue Service and Population Management Office.
Confederation chair Garin Dart said: “There will be a huge number of very disappointed people with real concerns for the future of their business and the people they employ.
“We urge the States to use the time we have before GST is introduced wisely to ensure it is handled better than past States projects. We will comment on this in more detail after discussing this at our board meeting on Monday.”
The Guernsey Retail Group also warned that the decision would leave many retailers disappointed and concerned about their future.
Its recent survey found that 95.4% of respondents had moderate or high levels of concern about GST. The group said retailers were already facing rising employment and property costs, freight pressures, recruitment difficulties, fragile consumer demand and competition from off-island and online operators.
Retail liaison officer Laura Clayton said: “The Guernsey Retail Group understands the concerns many retailers have. We remain absolutely committed to supporting businesses and are equally committed to encouraging people to buy locally.”
The group said the Policy & Resources Committee’s proposals acknowledged that GST was likely to increase prices, add inflationary pressure, reduce disposable income and change spending behaviour.
With the decision made, it said its focus would be on working constructively with government to minimise the impact, address competitive imbalances and ensure tax reform was accompanied by a credible plan for economic growth.
Its priorities include urgent reconsideration of the £280 de minimis threshold for goods purchased from off-island retailers. The group argued that government policy should not add to the disadvantages faced by businesses employing islanders, occupying commercial premises and investing locally.
Laura said: “Now that the decision has been made, the focus must shift to protecting Guernsey’s local economy and creating the conditions in which businesses can continue to trade, invest, and employ local people. Growth and tax reform must travel together. If government is asking businesses and consumers to carry more of the fiscal burden, it must also create the conditions that allow those businesses to grow. You cannot build a stronger Treasury by weakening the economy that ultimately pays for it.”
The retail group said the sector employed more than 3,500 people, supported suppliers and service businesses, and helped sustain St Peter Port, The Bridge and the island’s parish commercial centres.
Guernsey Retail Group director Malcolm Woodhams said: “Retail is not simply about shops. It is about jobs, livelihoods, local investment, vibrant commercial centres, and keeping more money circulating within Guernsey.
“The real question is no longer whether Guernsey will have GST. It is whether we use this moment to build a stronger and more competitive local economy alongside it. If local businesses thrive, Guernsey thrives.
“The GRG welcomes the commitment to economic growth made in the 2027 Budget.
“The planned £15m investment over the next three years is a start and we are keen to hear more details about how it will be spent. The GRG looks forward to working with the States to ensure some of the investment will benefit the on-island retail sector, which it turn will benefit the island’s wider economy.”
