Knowledge Centre
Jersey's Public Finances
Introduction
Jersey’s status as a British Crown Dependency means that it is financially independent. It needs to raise revenue through taxation, levies and charges sufficient to finance Government expenditure.
Tax system
Jersey has a tax system that is simple and stable. There are few changes over time in the structure or rates of taxation unlike what happens in many other jurisdictions.
Jersey’s tax policy is developed in accordance with the tax policy principles that have been agreed by the States Assembly.
1. Taxation must be necessary, justifiable and sustainable.
2. Taxes should be low, broad, simple and fair.
3. Everyone should make an appropriate contribution to the cost of providing services, while those on lowest incomes are protected.
4. Taxes must be internationally competitive.
5. Taxation should support economic, environmental and social policy.
6. Taxes should be easily implementable and administrable at a reasonable cost.
7. No one individual type of taxation will meet all these principles. But overall, the tax regime should represent a sustainable balance.
Taxes, and the mix of taxes, are reviewed and considered in light of these principles. These principles are very similar to those in other jurisdictions, although there is plenty of scope for different interpretations of what they mean. A distinguishing point for small jurisdictions with significant international business is that tax rates are to some extent a “price” for living or operating in the jurisdiction. It follows that it cannot automatically be assumed that any increase in tax rates will increase revenue; it is possible that the effect will be to reduce activity and therefore total tax revenue. Analysing the wider effects of possible tax changes is therefore critical in determining policy.
Personal income tax is capped at the rate of 20%. In 2024 the threshold for paying tax is £20,000 for a single person, £32,050 for a married couple/civil partnership and there is an allowance of £3,700 for each child. Taxpayers receiving the married couples’ allowance are taxed as a single unit, and an additional allowance of £7,950 is given if both individuals are working. This means the sum of the allowances given to two working, married, individuals is the same as two unmarried individuals (£40,000). Married couples’ taxation – as it is known - is being phased out and a system of independent taxation introduced.
Once income exceeds the tax allowance, a marginal rate tax band of 26% is applied to taxable income until tax due is equal to an effective tax rate of 20%. From that point tax is paid at 20%.
By comparison, in the UK the single person threshold is £12,570 (2024/25), the basic rate of tax is also 20% but higher rates of 40% are levied on income over £50,270 and 45% on incomes over £150,000. In Guernsey the single person threshold in 2024 is £13,900. The high thresholds mean that a significant proportion of workers in Jersey pay no income tax and about 50% of personal income tax revenue is paid by just 12% of taxpayers. Jersey has special provisions for high value immigrants. In 2019 169 high value residents paid around £21 million in income tax, an average of £124,000. Jersey has no capital gains or inheritance taxes.
In addition to large corporate retailers (annual turnover in Jersey in excess of £2 million), a number of specialist businesses including property development, residential and commercial letting business and utilities are taxed on their profits at the rate of 20%. Companies that are financial services businesses are taxed at 10% and all other companies are taxed at 0%. This is known as the 0/10 model of company taxation. These low rates help to bring business to the Island and increase the yield of personal income tax from those working for the businesses. As with personal income tax, company income tax is designed to attract business to the Island and therefore takes account of tax rates in other jurisdictions.
Impôts are similar in effect to excise duties in the UK. They are levied on imports of road fuel, vehicles, alcohol and tobacco.
There is no Value Added Tax in Jersey. Rather there is a goods and services tax (GST). This is levied at the rate of 5% on all goods and services with the exception of accommodation, exports, financial services, medical services, charities and school fees (provided the school is a registered charity). There is a £300,000 threshold for GST, so small retailers are exempt.
Government finances
Like other nations Jersey has to raise taxes to finance public expenditure. The detailed statistics for 2022 are published in the States of Jersey 2023 Report and Accounts. Estimates for 2024 are in the Government Plan 2024 - 2027. The statistics in this paper are largely extracted from that report.
Table 1 shows how revenue is estimated to be raised in 2024.
Table 1 Jersey Government revenue, 2024
“Other” includes dividends and a contribution of about £30 million from Andium Homes, the Government-owned social housing provider (which can be regarded as the equivalent of notional interest on the value of the housing stock transferred to it) and dividends.
Jersey does not publish public expenditure figures by activity, but rather by government department. Table 2 shows the planned figures for 2024 as set out in the Government Plan 2024 - 2027. The figures are all net, that is after deducting income received by the department.
Table 2 Planned revenue expenditure by department, 2024
Capital expenditure in 2024 is forecast to be £113 million, made up of –
Estates £46 million
Infrastructure £30 million
Information technology £20 million
Healthcare facilities £70 million
Other capital expenditure £18 million
Total £184 million
Although the Government Plan and Government accounts record expenditure by department, a new report gives a breakdown of expenditure by function. The Jersey Classification of the Functions of Government Report 2022 was published on 21 November 2023. The report classifies expenditure in accordance with the United Nations Functions of Government system. The system enables comparisons to be made between jurisdictions and over time.
The definition of “government” includes the government departments, non-ministerial bodies, States funds, Andium Homes and the parishes. Trading businesses such as Ports of Jersey and the Jersey Development Company are excluded.
The following table shows the key data for Jersey for 2022 and, for comparison, the figures for the UK for 2021, the latest year for which figures are available.
Table 3 Classification of government expenditure, Jersey and the UK
It should be noted that “housing and community affairs” covers the administration of housing development and housing standards. Andium Homes provides subsidised accommodation and is included in the “social protection” category.
Health, education and social protection accounted for 73% of Jersey government expenditure and 19% of gross value added.
The comparison with the UK shows –
- Total government expenditure was 25.5% of GVA in Jersey, less than half the UK figure of 53.9%. In almost every category of expenditure the Jersey proportion was below the UK proportion. However, it is also necessary to compare actual levels of expenditure. Using 2021 figures for both jurisdictions, Jersey’s GVA per capita was 60% higher than the UK’s. Expenditure per capita was £13,800 in Jersey, 16% less than the UK figure of £16,400.
- As a proportion of total government expenditure the main differences are in defence (0.1% in Jersey as against 4.5% in the UK) and economics (largely to support particular industries) (4.5% as against 12.5%).
The report gives a wealth of detailed information, which will facilitate a better understanding of government expenditure. Over time comparisons with other jurisdictions will also be useful. Neither Guernsey nor the Isle of Man currently produce comparable figures.
Reserves
The Government’s policy is to fund revenue expenditure from income rather than borrowing and to hold reserves in a number of funds. However, the nature of Covid was such as to require a significant budget deficit in 2020 and 2021.
The Strategic Reserve Fund was established in 2005 to be used in exceptional circumstances to insulate the Island’s economy from severe structural decline or from major natural disasters. The forecast figure for fund in 2024 is £1,071 million.
The Stabilisation Fund was established in 2019 and is forecast to be £0.6m in 2024. The intention is to build up the fund in buoyant economic conditions and make payments from it at times of economic downturn. £50 million was paid into the fund in 2019, almost all of which was spent in 2020 in response to the pandemic.
Social security
Jersey has its own social security system, providing the full range of benefits. The basic pension for a single person is £272 a week and for a married couple based on the husband’s earnings £451. In 2024 employees pay a social security contribution rate of 6% on monthly earnings between £1,164 and £5,450. Employers pay 6.5% of employees’ monthly earnings up to £5,450 and 2.5% on earnings between £5,450 and £24,850. By comparison, in the UK employees pay 12% and employers 13.8%.
In 2024 Social Security contributions are estimated to be £251 million and benefits £320 million. The social security fund is estimated to have a balance of £95 million at the end of 2024. Unlike the UK, Jersey State pensions are funded rather than met by current contributions. The reserve fund to meet future pension liabilities is estimated to be £2,136 million at the end of 2024.
In addition there is an income support scheme funded by general taxation.
The funding of long-term care is a challenge for all countries. Jersey operates a long-term care scheme under which care costs in excess of £60,160 are met by a fund. The scheme is paid for by an additional charge of 1.5% on taxable income. In 2024, contributions are estimated to be £45 million and benefits £80 million. The fund is estimated to be £61 million at the end of 2024.
There is a separate Health Insurance Fund. In 2024 contributions, which are part of social security contributions, are estimated to be £48 million and benefits £51 million. In addition a grant of £37 million will be paid into the fund. The fund is estimated to be £108 million at the end of 2024.
International comparisons
On 13 March 2024 Statistics Jersey published Government employment, revenue and expenditure – international comparisons. The foreword to the report states that –
This report pulls together already published information from Statistics Jersey, Government of Jersey departments, and international organisations such as the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU), to paint a picture of the Government of Jersey compared to our neighbours and international comparators.
This section draws exclusively on that report.
Tax revenue as a percentage of Jersey’s Gross Domestic Product (GDP) in 2021 was 22.9%, substantially lower than the OECD average (34.2%) and the United Kingdom (33.5%).
The section on the structure of the tax system in 2021 is reproduced below –
Jersey received 55% of its tax revenue from tax on income, profits, and capital gains, compared with the OECD average of 35%. Among the jurisdictions compared, Jersey had the fourth-largest proportion of tax from this source, with only Denmark (66%), Australia (62%), and New Zealand (57%) receiving a higher proportion of their taxes from income, profits, and capital gains. Note that Denmark, Australia, and New Zealand all fund their social security systems through general taxation rather than social security contributions. Of all the jurisdictions compared, Jersey had the largest proportion of revenue from these income tax and social security contributions, at 76%; in comparison, the OECD average was 61%.
Jersey had the lowest proportion of tax received from goods and services at 16%, half the OECD average of 32%, and marginally lower than that of the United States at 17%.
A more detailed analysis of tax revenues relating to wages and salaries by type was provided –
Taxes on wages and salaries include: taxes on personal income, profits, and capital gains (i.e. excluding taxes on corporate incomes, profits, and capital gains); social security contributions; and taxes on payroll and workforce. Of all the jurisdictions compared, Jersey had the highest proportion of tax revenue collected from taxes on wages and salaries at 69%, compared with an OECD average of 52%.
Jersey had the second-largest proportion of tax revenue from taxes on personal income, profits, and capital gains at 48%, double the OECD average of 24%. Only Denmark had a higher proportion of tax revenue from personal taxes, at 52%. However as noted above, Denmark, Australia, and New Zealand fund their social security system through general taxation rather than separate social security contributions.
The proportion of tax revenue in Jersey collected through social security contributions was 21%, which was below the OECD average of 26%, and was between Sweden (21%) and the UK (20%).
Government expenditure as proportion of GDP in 2021 was 28.1%, just over half the EU proportion of 50.2% and the UK proportion of 48.2%. Jersey’s proportion was similar to that of Guernsey (29.0%), Ireland (24.8%) and the Isle of man (24.0%). The report noted that “all these jurisdictions have large finance and professional services sectors that generate a high GDP per capita.” Government expenditure per capita in purchasing power parity terms was $16,937, well below the OECD average of $24,432 and the UK figure of $24,420.
The following table, reproduced from the report, shows a breakdown of expenditure
Table 4 Breakdown of Government expenditure by function, 2021
The report identified the following key points –
- Jersey’s spend on general public services (9.4% of spend) was marginally above that of Ireland (9.3%), and slightly below that of France (9.8%) and the UK (9.7%), all of which were below the EU average (11.7%).
- Social protection was the largest proportion of spend in all five jurisdictions: 32.7% in Jersey, 33.3% in the UK, 35.2% in Ireland, 41.9% in France and 39.9% for the EU.
- Defence represented only 0.1% of government expenditure in Jersey, compared with 4.5% in the UK, 0.8% in Ireland, 3.0% in France, and 2.5% in the EU.
- Jersey’s spend attributed to housing and community amenities was 0.5%, lower than the proportions in the other jurisdictions considered: 1.7% in the UK, 2.3% in Ireland, 2.1% in France, and 1.2% in the EU. The report notes that Andium Homes is included in social protection, and not housing
- Jersey had the highest proportional spend of these five jurisdictions on health, which represented 28.5% of government expenditure in Jersey, 20.5% in the UK, 21.2% in Ireland, 15.6% in France, and 15.8% in the EU.
- Jersey had the second-highest proportional spend of these five jurisdictions on education, which represented 11.6% of government expenditure in Jersey, 11.2% in the UK, 12.0% in Ireland, 8.9% in France, and 9.4% in the EU.
Further information
The most accurate statistics on the Island’s finances are in the States of Jersey 2023 Report and Accounts. However, this is a long, technical and complex document. There is a better analysis of the figures and forward projections in the Government Plan 2024 - 2027.