Author Topic: GST on food and drink  (Read 3134 times)

Offline Paternoster

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GST on food and drink
« on: October 14, 2008, 01:44:07 PM »
Reading the ongoing debate on GST and being told to get my facts right I have been doing a bit of research.  I think Senator Norman summed up the problems with GST exemptions in his recent speech which I have copied below.  It has certainly got me thinking and deserves discussion.

2.1     Senator L. Norman:
I feel, and I think many other Members feel, badly let down by the Council of Ministers over the G.S.T. debacle.  [Approbation]  It is true and others in this Chamber, albeit in the minority, are opposed to the introduction of this tax at all because of its regressive nature, its inflationary impact and because there is not really a need for it anyway except to fund the tax and spend plans of the current Council of Ministers.  Indeed, it is even driving more people into welfare, or income support, as we now call it, otherwise why would there be the need for the increased budgets for income support being proposed?  But, Sir, even though I opposed the introduction of G.S.T., when it became a reality I did support the Council of Ministers when they said they wanted a simple tax with few or no exemptions.  I was convinced by their argument that if we had to have this tax then it should be as low as possible for as long as possible and the way to do it was few exemptions.  But now both of these principles, simplicity and exemptions, have been long abandoned.  Exemptions were created almost daily at one point and the concept of simplicity has completely been abandoned indicated by the support for this amendment today.  In their comments on my amendment, the Council of Ministers say quite rightly that the U.K. system of V.A.T. is regarded as the worst and most complex scheme in the world; not just Europe, in the world.  Yet, this is the scheme that the Deputy of Grouville proposes and the Council of Ministers is prepared to accept.  The worst and most complex scheme in the world is what the Council of Ministers wants us to adopt.  They also say that the U.K. scheme is expensive to administer.  Not my words; these are the words of the Council of Ministers in their comments.  But they want to adopt it.  The world, or at least this little part of it, has gone mad.  To quote an oft-used phrase of Senator Syvret: “You really could not make it up.”  My amendment gives us the opportunity to achieve what the Deputy of Grouville wants to achieve: exemptions on food, but also to reclaim some of that simplicity by exempting all food, not just some food, which will be the case if we adopt the U.K. model of V.A.T. arrangements which it is quite clear if we do that we would be entering a bureaucratic nightmare.  Now, the Deputy spoke about her report and the 2 and a half page appendix attached to it which she said sounds complicated but is not really.  Sir, I do not know if that particular bit of information is out of date or simply is a précis of the reality of the complication but I also printed out the V.A.T. notice on food exemptions and that comes to 24 pages.  I did not bother to print out the other 4 notices supplementary to this one to explain some of the items in this notice - well, I ran out of paper - but its advice and instructions which will have to be absorbed and understood by food producers, manufacturers, wholesalers, distributors and, of course, the consumer might want to know a bit about it as well.  Now just to give a few examples of some of the complexities which the Deputy wishes to take us into, supported by the Council of Ministers.  We are told that the retailer will always have the standard-rate ice cream but zero-rate of frozen yoghurt.  We are told that live animals will be standard-rated if of a species generally used for human consumption.  I was quite amused to read in one of the other notes that if you go and buy a pet cat you will have to pay V.A.T. or G.S.T. but if you buy a pet rabbit you will not because rabbits can be eaten, whereas it is unlikely that we would eat cats except in an absolute emergency.  [Laughter]  Fish, live fish, are zero-rated unless it is fish for bait.  So when you go to the fish market, if you are a fisherman, you will have to explain that you not buying it for consumption but for bait and will have to pay the G.S.T. on it.  Fruit, of course, is zero-rated but beverages made from fruit are not.  Interesting question: an orange is free of tax but if you have freshly squeezed oranges as a drink then you have to pay the tax on it.  Nuts - a very interesting one.  [Laughter]  Nuts are zero-rated if raw and unprocessed for human consumption, also roasted or salted nuts in their shells; that is zero-rated.  But if they are shelled and either roasted or salted, then they became standard-rated.  This is a simple system.  Salt; zero-rated for culinary use but for non-culinary use standard-rated. You have to tell the retailer what you are buying the salt for.  Another interesting one: sandwiches.  Sandwiches as a general grocery item are zero-rated.  Sandwiches as part of a party or buffet service; standard-rated.  So when you go to your supermarket to buy the sandwiches, better be careful that these are for your own consumption and you are not having a few friends around to eat them with you because that might be considered a party and therefore taxable.  Bread and bread products such as rolls, baps and pita bread, zero-rated, but the same products supplied as part of a hot takeaway meal are standard-rated.  More confusion.  Chocolate chips, leaves and scrolls; zero-rated.  Chocolate buttons; standard-rated.  The famous jaffa cakes now, after the court case, zero-rated but gingerbread men decorated with chocolate, unless this amounts to no more than a couple of dots for eyes, are standard-rated.  Biscuits coated with caramel are zero-rated.  Ice cream wafers covered in caramel; standard-rated.  Hot food - this is one we really need to take note of.  Many bakery products, particularly pies, pasties and other savouries are baked on the retail premises and are sold while hot.  If you sell products that are hot simply because they are freshly baked with no intention of supplying them to be eaten while hot they can be zero-rated.  However, if you sell hot food specifically for consumption while still hot then this is supply in the course of catering and standard-rated.  The borderline between freshly-baked and hot takeaway food can be a difficult one and if you sell any hot food you are advised to read Notice 709/1, Catering and Takeaway Food which sets out the distinction in more detail: “If you are still in any doubt contact our National Advice Service.”  [Laughter]  This is what we are being asked to adopt, make no mistake about it.  Zero-rated cream gateau but ice cream gateau is standard-rated.  Frozen yoghurt which needs to be thawed completely before it can be eaten is zero-rated; frozen yoghurt is standard-rated.  I could go on for ever.  But let us look at this one: liqueur chocolates.  Liqueur chocolates are standard-rated; rum babas are zero-rated.  [Laughter]  I am sorry, I am enjoying this.  Prawn crackers made from tapioca are zero-rated; prawn crackers made from cereals are standard-rated.  Yes, it is funny, is it not?  But that is what we are going to have in place in this Island if this amendment supported by the Council of Ministers gets adopted.  We are really, really heading for a nightmare.  [Approbation]  I agree, exempt food, but please let us exempt all food.  We do not need all these huge complications.  There is a line in here in one of these notices which I wrote down and it describes it almost perfectly: “A product is food if the average person knowing what it is and how it is used will consider it to be food and it is fit for consumption.”  That is all we need to do.  That is all.  Not 200-odd pages of nonsensical notes of what is and what is not exempt.  The Deputy implied that the V.A.T. rules in the U.K. were now settled and everybody knew what products were standard-rated and which were zero-rated.  I am afraid that is not the case.  The tribunals are meeting weekly, court cases go on, the Government has to make refunds and if the retailer loses he has to pay them all back.  It really is absolutely shambolic and the lawyers are absolutely loving it.  Sir, when we introduced G.S.T. we promised to keep it simple.  My amendment invites the States to keep that promise.  I make the amendment, Sir.


Razzard

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Re: GST on food and drink
« Reply #1 on: October 14, 2008, 02:13:11 PM »
Labey's proposition was thought by some to be a put up. I don't know if thats true or not but the Le Fondre proposition took the heat when it came down to it.

Don't you need to bring the magnifying glass back to the budget debate and ask why the States keep on spending more in the first place?

I mean as somebody with a tendency to dance to the right wouldn’t you rather a smaller government, with less administration, lower taxes and less regulation?

I say the COM is out of control. Jersey has become some weird hybrid of rampant free market capitalism and a heavily administered socialist state - the worst of both ideologies.

Offline Sarah Ferguson

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Re: GST on food and drink
« Reply #2 on: October 14, 2008, 02:44:12 PM »
Absolutely - less governent, less political correctness and less spending!

And a broad based low rate GST is spread across the whole community.  When we are all staggering around on our Zimmerframes the tax burden will not be dumped on those who are still working in order to support the elderly and there will not be the incentive to import more young taxpayers to support us.

The increase in income tax allowances and the reduction in marginal relief will benefit those who are just coming into the tax brackets.  The money will go straight back into their pockets. In other words pensioners and families with two children and a mortgage and most of Middle Jersey. 

Some people I have spoken to have used the Income page on gov.je to work out the effect of marginal relief (used to be called small income relief) and were pleasantly surprised by the reductions.

Razzard

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Re: GST on food and drink
« Reply #3 on: October 14, 2008, 03:07:55 PM »
Absolutely - less governent, less political correctness and less spending!

And a broad based low rate GST is spread across the whole community. 

Well I was kind of hoping you might stretch as far as to say that by reducing overall government expenditure we might avoid having to pay GST altogether. You know the exercise that Kevin Keen did right?

You'll have to excuse me if my knowledge of these things is a little simplistic. I just don't know how hard it is to cut expenditure within government in this Island. Seems to me from an outsider's perspective that the Chief Officer's are building empires that the public don't realise they need and the politicians, not wishing to seem as if they don't want to fight the Departments corner, are making the case and winning in the COM.  If true then who pays for this madness? We all pay I guess.

I might be wrong but my instinct coupled with the anecdotal evidence I hear is telling me things have to change. That's why I feel compelled to vote in the main for new people in this election. I think Danny Wimberley summed it up last night with his comments about trust.