Jon Bond

Small Island, Big Ideas

Tag: guernsey

  • Guernsey’s Tax Reform 2026: What It Actually Says, and What It Doesn’t

    Guernsey’s Tax Reform 2026: What It Actually Says, and What It Doesn’t

    After years of Green Papers, Billets, rejected amendments, and deferred decisions, the States of Deliberation are again being asked to vote on a substantive, costed tax reform package. The Policy Letter published this week is the culmination of over a decade of deliberation, and whatever you think of the conclusions, it is a serious piece of work that deserves a serious read.

    So let me try to give you that.

    The Problem They’re Trying to Solve

    The starting point is not in dispute. Guernsey has been running a structural deficit for several years — spending has consistently outpaced revenue, and reserves have been used to paper over the gap. The 2026 Budget estimate puts the structural deficit at around £77 million a year, and that figure is calculated after factoring in the expected £40 million annual uplift from Pillar 2.

    That £77 million is not a rounding error. It is not going to be fixed by efficiency savings alone. The General Revenue Reserve, the buffer that has been absorbing shortfalls, is projected to be exhausted by 2031 on the current trajectory.

    The demographic picture makes this worse. The working age population is shrinking relative to the overall population. Three quarters of all States revenue comes from individuals, personal income tax and social security contributions. That tax base is narrowing as it ages, just as demand for health, long-term care and pension expenditure accelerates. The Policy Letter is honest about this: these pressures will continue to grow for several more decades.

    This is the genuine context for what follows. You can disagree with the solution without ignoring the underlying problem.

    What the Package Actually Contains

    The proposed package has five main components. Here is what each actually does.

    1. Income Tax: Lower Rate, Lower Threshold

    The headline change is a reduction in the basic rate of personal income tax from 20% to 15%, applied to income up to £28,000. Income above that threshold continues at 20%. The personal allowance also rises by £600.

    This sounds like a tax cut, and for most earners it is. But the design matters. The 15% band cuts off at £28,000 which is below the median full-time earnings figure in Guernsey. The policy is deliberately redistributive: lower and middle earners gain more than higher earners in percentage terms.

    The net revenue impact is a reduction of £28 million. The income tax reform is not a revenue-raiser, it is the redistributive counterweight to GST.

    2. Social Security: A Restructured System

    The social security changes are more complex and have been significantly moderated from the November 2024 package. Key changes include:

    • A new social security allowance for employed and self-employed contributors, set at £11,122 (currently the allowance for non-employed contributors), with a longer-term ambition to align this with the income tax personal allowance
    • Employer contributions increasing to 7.6% by 2029 (phased from the current 7.1%), payable up to the Upper Earnings Limit of £196,560
    • A new additional rate of 2.5% for employers and self-employed individuals on earnings between the Upper Earnings Limit and £300,000
    • Employee contributions rising to 8.5% from 2028; self-employed to 14.5%; non-employed under pension age to 8.5%; non-employed over pension age to 4%

    One significant change from November 2024: the proposal to apply social security contributions to all income (including rental income) has been deferred. The Policy Letter is candid about why: concern that this would push landlords out of the market, compounding Guernsey’s already serious housing supply problem.

    The net revenue impact of the social security changes is a gain of £2 million.

    3. Transport: Fuel Duty Down, Annual Vehicle Tax Up

    This is a package of changes rather than a single measure. Fuel duty drops by 25%, broadly bringing Guernsey into line with Jersey, an estimated saving of £130–£140 per vehicle per year for private motorists.

    In exchange, a new annual vehicle tax is introduced, covering petrol, diesel, hybrid and electric vehicles, based on weight and emissions. The range is £25 to £280 for private vehicles, with a median charge of around £132.

    A surcharge is also added to first registration duty for private vehicles valued over £50,000 (starting at £2,500).

    The net revenue gain from transport changes is £7 million. The fuel duty cut is the headline that will get the press coverage; the annual vehicle tax is the structural change that matters for the long term, particularly as electrification reduces fuel duty receipts over time.

    4. GST: 3%, From 2028

    This is the most controversial element, and the one that has dominated debate for years. The proposal is a Goods and Services Tax at 3%, to be introduced from 2028.

    This is a reduction from the 5% that was agreed in November 2024, driven by concern about the inflationary impact. At 3%, the modelling suggests a one-off increase in RPIX of around 1.9% at introduction — down from 3.2% under the previous 5% proposal.

    The GST package includes:

    • Uprating of the States Pension, income support and other benefits to cover the increased cost of living, with those increases introduced ahead of the GST
    • An Essential Costs Relief Payment for those on lower incomes not in receipt of income support
    • An International Services Entities (ISE) scheme, mirroring Jersey’s, allowing finance businesses with international clients to pay a fee for an End User Relief Certificate rather than filing full GST returns. Expected to raise £10–12 million annually
    • A commitment not to increase the GST rate before the 2030 assurance review

    The net revenue gain from consumption tax measures is £55 million, the dominant revenue line in the package.

    A two-thirds majority requirement to increase the GST rate in future will also be introduced, providing a structural protection against rate creep.

    5. Corporate Tax: Modest Adjustments Only

    The headline finding from the Tax Review Sub-Committee, chaired by Deputy Charles Parkinson and including three international tax experts, is that fundamental corporate tax reform is not recommended at this time.

    The Sub-Committee considered five options, including a move to a territorial tax regime and a shift from Zero-10 to Zero-15. Both were rejected. A territorial regime would trigger a full review by the EU Code Group, take 12–18 months to resolve, and carry significant risk of business relocation. Moving unilaterally to Zero-15 was modelled to produce minimal net revenue gain once behavioural responses are factored in.

    What is recommended is a set of targeted adjustments:

    • Extending the 10% intermediate rate to apply to the full profits of regulated businesses (not just the regulated activity), aligning with Jersey’s approach (estimated yield: £0.5 million)
    • Extending the 10% rate to prescribed businesses — accountants, legal firms, estate agents registered with the GFSC (estimated yield: up to £2 million)
    • Modest increases to Guernsey Registry fees (estimated yield: ~£0.5 million at RPIX +5%)
    • Further extension to construction and retail deferred until 2030 at earliest

    The net corporate tax gain in the package is £6 million.

    The Sub-Committee also recommends that P&R opens discussions with Jersey and the Isle of Man about a coordinated move to Zero-15 after their General Elections this year — an interesting recommendation that could be significant if picked up.

    The Numbers in Total

    MeasureNet Revenue Impact
    Income tax changes-£28m
    Social security changes+£2m
    Transport taxes+£7m
    GST + ISE scheme+£55m
    Corporate tax adjustments+£6m
    Spending efficiency savings+£20m
    Total~£62m

    Against a structural deficit modelled at £77 million, this package does not fully close the gap. The Policy Letter acknowledges this. That is precisely why the assurance review in 2030 matters, and why the commitment not to raise GST before that review carries real weight.

    What This Package Is, and What It Isn’t

    The political debate will focus on GST. That is understandable as it is the largest single revenue line, and it affects everyone. But framing this as simply “introducing a tax on food and goods” misses the architecture of the package.

    The income tax reduction to 15% is not an afterthought. For a single earner on £28,000, the saving on income tax alone exceeds the estimated annual cost of GST on their consumption. The benefit and pension uprating is front-loaded, it happens before GST is introduced, not after. The Essential Costs Relief Payment is targeted at those not already captured by income support.

    The distributional analysis in the Policy Letter shows that lower and middle income households are, on average, expected to be better off under the full package than they are now. Higher income households are expected to be modestly worse off. That is a deliberate policy choice.

    Whether you accept that analysis depends on whether you trust the modelling, the mitigations, and the political commitment to hold the rate at 3%. Those are legitimate questions.

    What I Think

    The structural deficit is real. The demographic challenge is real. The reserves position is serious. Anyone who believes Guernsey can grow its way out of this problem without broadening the tax base is not engaging with the numbers.

    The balance struck here, lower income tax rates for lower earners, a modest consumption tax, restructured social security, and restrained corporate tax changes, is a considered one. It is not the package I would have designed from scratch, and there are elements I would push back on. But it is a serious response to a serious problem, with a genuine attempt at a progressive tax approach.

    The question the States must now answer is whether they agree. After twelve years of review, the question is no longer whether to act, it is whether this is the right way to act.

    I’ll be watching the debate closely.

    Jon Bond is Founder and CEO of Evans Bond Limited, an accountancy and advisory practice in Guernsey, and principal of Melius Consulting Limited – a business consultancy. He is also a non-executive chairman of CI Co-op and NED at Sark Shipping. The views expressed here are his own.

  • Guernsey’s 2025 Accounts: The Headline Looks Good, The Small Print Is More Complicated.

    Guernsey’s 2025 Accounts: The Headline Looks Good, The Small Print Is More Complicated.

    The States of Guernsey has just released its consolidated financial statements for 2025 and the headline figure will catch your eye: a reported net surplus of £106 million.

    After years of discussion about a structural deficit and the need for fundamental tax reform, that sounds like good news. But read past the headline, and a more nuanced picture emerges – one that has significant implications for every business and resident on the island.

    What the Accounts Actually Show

    The States of Guernsey Consolidated Accounts (including the States itself, plus entities like Guernsey Water, Guernsey Electricity, Guernsey Ports, Guernsey Post, Aurigny etc.) reported:

    • Total revenue: £1.25 billion (up 14.4% from £1.09 billion in 2024);
      • Tax and social security made up £881 million
    • Total expenditure: £1.18 billion (up 6.3% from £1.11 billion in 2024);
    • Net surplus: £106.1 million (compared to a surplus of £20.3 million in 2024);
    • Net assets: £4.08 billion (up from £3.92 billion in 2024);
    • Total debt: £403.5 million.

    On the face of it, the improvement is dramatic — an £86 million swing in one year.

    Why the Treasurer Is Urging Caution

    Here is where it gets interesting. The States Treasurer’s own report, published alongside the accounts, is notably careful about what the surplus actually means.

    The £106 million net surplus figure includes £118.9 million in unrealised investment gains on the States’ £1.73 billion investment portfolio that have not been realised. Strip those out and the underlying operating position is actually in deficit.

    The Treasurer’s report goes further: “With one-off items and unrealised investment valuation excluded and after adjusting for the long-term capital investment requirement (2% of GDP), the underlying financial position of the group had a funding gap to close of some £50 million in 2025.”1

    In other words, the States’ own assessment is that on a sustainable, recurring basis, Guernsey is still spending around £50 million more per year than it earns.

    The One-Off Items That Won’t Come Back

    Two specific items inflated the 2025 figures and are explicitly flagged as non-recurring:

    • £39 million from Pillar 2 tax. Guernsey implemented the OECD’s global minimum tax on the profits of large multinational companies in 2025. The first year produced £39 million of accrued income, but critically, a significant portion of this has been recognised in the accounts now but will not be collected until mid-2027. The cash hasn’t arrived yet, and it is a new revenue stream whose future (and 2025) yield remains uncertain.
    • £34 million in one-off corporate tax receipts. These relate to banking sector tax adjustments from prior years. The Treasurer’s report is explicit: these are not expected to recur in future years.

    Together, those two items account for £73 million of the reported surplus. Without them, and without the unrealised investment gains, the position would look very different indeed. As tax expert Mike Williams has noted publicly, without Pillar 2, the structural deficit would have exceeded £100 million.2

    Despite a £106m Surplus, Cash Fell by £9 Million

    One of the most striking single facts in the accounts is this: despite the reported £106 million surplus, the States’ cash balances actually fell by £9 million during the year.

    How? Because £113 million was invested in infrastructure, assets and major projects during 2025 – capital spending on roads, water, power, ports and other long-term assets. The Group’s cash position moved from a net positive of £4.9 million at the start of the year to a net negative position of £4.4 million by year-end.

    This is a useful reminder that a surplus in the income statement does not automatically mean more cash in the bank.

    The Investment Portfolio: Good Returns, Below Target

    The States’ General Investment Portfolio, which was worth approximately £1.73 billion, delivered a return of 7.2% in 2025. That is a solid return by most measures, and it generated £118.9 million in unrealised gains that flow into the headline surplus figure.

    However, the portfolio’s target return is 8.5%, and its policy benchmark is 9.1%, so performance came in below both benchmarks. The portfolio also paid out £122.5 million during the year to fund capital investment and other commitments, keeping the overall value broadly flat year-on-year.

    The Pension Position Improved Significantly

    One piece of genuinely good news in the accounts is the pension position. The Group’s defined benefit pension liability of £44 million in 2024 has swung to a £6.1 million asset in 2025, a £50.1 million improvement. This is driven by changes in actuarial assumptions and investment performance, and it reduces a long-term financial risk that had been building for several years.

    The Bigger Picture: A Structural Problem That Has Not Gone Away

    The 2026 Budget, published before these accounts, already acknowledged a structural deficit of £77 million that will persist until fundamental tax reform is implemented. The 2025 accounts do not change that assessment, if anything, they illustrate exactly how fragile the revenue base is.

    Deputy Gavin St Pier, the former P&R Committee’s treasury lead, has previously pointed to a fundamental vulnerability: approximately 75% of Guernsey’s public revenues come from personal income tax and social security contributions from the working-age population. That is an unusually narrow base for a government of this scale, and one that is vulnerable to demographic change, economic slowdown, or any shift in the financial services sector.

    What About the GST Debate?

    Our previous blog post about GST highlights the complexities of GST, but even since then the landscape has shifted. These accounts create the real risk that any tax reform will again be kicked down the road by the States Assembly.

    The tax reform picture has shifted since the Budget. The GST-plus package of a 5% goods and services tax combined with income tax cuts to 15% had been the expected solution. However, as of late May 2026, Guernsey Press is reporting that four of the five senior P&R Committee members oppose GST-plus and the committee is now developing an alternative plan.

    The final proposals are expected in a policy letter on 8 June, with a States debate in July. Whatever the outcome, fundamental change to Guernsey’s tax system is now a matter of when, not if. The numbers in these accounts make that clear.

    What Does This Mean for You?

    For businesses and individuals in Guernsey, the 2025 accounts are a useful prompt to consider a few things:

    Tax change is coming. Whether it is GST, higher income tax, extended corporate tax rates, or some combination, the fiscal reality documented in these accounts makes reform inevitable (even if delayed). Planning ahead, understanding your personal and business exposure to likely scenarios, is worth doing now, before the States makes its decision in July.

    Corporate tax rates may change. The possibility of extending the 10% intermediate corporate income tax rate to GFSC-regulated professional services firms is still in play. If you run a regulated business, this could affect your tax position from 2027 or 2028.

    Capital investment is continuing. The States spent £113 million on infrastructure in 2025. That spending supports the local economy, but it also means ongoing capital requirements will keep pressure on the public finances regardless of what happens with the revenue side.

    The Pillar 2 income is not guaranteed. The £39 million recognised in 2025 will not be collected until mid-2027, and the long-term yield of this new tax on multinational profits is inherently uncertain. It should not be counted as stable, recurring income.

    Talk to me

    The next six months will be defining for Guernsey’s fiscal future. Whether you are a business owner thinking through the implications of tax reform, an individual planning your finances ahead of possible changes, or a regulated firm concerned about corporate tax rate changes, my Accounting firm Evans Bond can help you understand your position and plan accordingly.

    Visit our website for more info.

    Jon Bond is Founder and CEO of Evans Bond Limited, an accountancy and advisory practice in Guernsey, and principal of Melius Consulting Limited – a business consultancy. He is also a non-executive chairman of CI Co-op and NED at Sark Shipping. The views expressed here are his own.

    1. States of Guernsey Accounts 2026 ↩︎
    2. Guernsey Press 20th May 2026 ↩︎

  • The Island Economy in 2026: Five Signals I’m Watching

    The Island Economy in 2026: Five Signals I’m Watching

    Introduction

    Coming up to the halfway mark of 2026, and the Channel Islands economy continues to resist easy characterisation. The headline numbers look stable. The texture underneath is more interesting and, in some places, more concerning, than the broad brush suggests.

    I’ve been involved in leading financial services businesses in Guernsey for over 15 years, and sitting on the boards of CI Co-op and Sark Shipping gives me a vantage point that I think is worth sharing.

    These are not forecasts. They’re observations from someone paying close attention.

    Signal 1: Supply Chains are Fragile

    The narrative that post-pandemic supply chain disruption is “fixed” doesn’t hold up in a small island context. Lead times to the Channel Islands for specialist supplies remain longer and less predictable than they were in 2019.

    Businesses that have adapted — by carrying more stock, diversifying suppliers, or redesigning their service offerings are noticeably more resilient. Those who assumed a return to pre-2020 norms are still being caught out. The lesson here isn’t specific to islands. But islands make the lesson visible faster.

    Signal 2: The Talent Pipeline is Narrowing

    Finding mid-level professional talent in Guernsey has become materially harder in the past 18 months. This is partly demographic, a smaller cohort moving through the local pipeline, and partly the result of increased competition from remote-work opportunities that didn’t exist five years ago.

    The best people have more options. That’s good for them and requires genuine creative thinking from employers who want to attract and keep them. Retention strategies that worked in 2019 – stability, island lifestyle, modest salary premium, need updating.

    Signal 3: Consumer Behaviour has Shifted Permanently

    The “island premium” – the willingness of local consumers to pay more for local goods and services because of limited alternatives, is being eroded by e-commerce and changing expectations. This isn’t a crisis, but it is a structural shift. Businesses whose pricing assumed a captive local market should be modelling different scenarios.

    Signal 4: Digital Adoption is Uneven

    Some Guernsey businesses have accelerated their digital capability significantly over the past three years. Others have barely moved. The gap between these two groups is now visible in trading performance, client acquisition, and staff expectations.

    This is not primarily a technology problem. It’s a leadership problem. The businesses falling behind are almost always led by people who view digital investment as a cost rather than a capability.

    Signal 5: Community Institutions are the Overlooked Infrastructure

    Local charities and faith organisations don’t appear in economic forecasts. They should. These institutions provide social and operational infrastructure that a small island economy could not replace. Their resilience is a precondition for everything else.

    Business leaders who don’t engage with and support these organisations are, whether they know it or not, free-riding on a system they’re not contributing to.

    Conclusion

    None of these signals is cause for alarm. But together they describe an economy that needs proactive leadership from business owners, board members, and community institutions to navigate well.

    I’ll be writing about each of these in more detail over the coming months. If you have a perspective from your own sector, I’d genuinely like to hear from you.

    Jon Bond is Founder and CEO of Evans Bond Limited, an accountancy and advisory practice in Guernsey, and principal of Melius Consulting Limited – a business consultancy. He is also a non-executive chairman of CI Co-op and NED at Sark Shipping. The views expressed here are his own.