A NEW draft law has been lodged to make independent taxation compulsory.
The legislation is ‘the final stage in the process of moving away from the outdated system of taxing couples differently depending on their marital status’, according to Social Security Minister Elaine Millar.
In a report accompanying the draft legislation, which is due to be debated on 18 July, Deputy Millar wrote: ‘With the adoption of the law, a line has been drawn that will result in an ever-decreasing pool of individuals whose marital status determines their tax treatment. The purpose of this draft law is to finish the process already under way, providing Jersey with a personal tax system that befits the 21st century.’
However, in response to what he described as the ‘unpopularity’ of the legislation, Deputy Lyndon Farnham has already lodged a proposition seeking to allow married couples and civil partners who currently complete a joint tax return – and who have not opted for independent taxation – to retain that right. His proposition is due to be debated next week.
Deputy Millar’s draft law constitutes the final stage in a process that began in September 2021, when the States Assembly decided to introduce independent taxation for individuals who are married or entered into civil partnerships after 31 December 2021, as well as for married couples or those in civil partnerships who arrived in Jersey after 31 December 2021 and those opting for separate assessments in 2020 who elected to move to independent taxation.
A second phase allowed existing couples to voluntarily elect for independent taxation for the year of assessment 2022.
If the draft law is approved by the Assembly next month, mandatory independent taxation will be introduced for all couples from the year of assessment 2025.
Recognising that, while the majority would be unaffected by the change, some 6,400 couples would see their liability increase, a ‘compensatory allowance formula’, which will be in place for at least ten years, has been included.
‘It would ensure that the combined tax bill of any couple in this group remains equivalent to that under married couple’s taxation. The effect of the allowance would be greatest in its first year of operation, with the effect eroding with inflation over time. If it was maintained indefinitely, it would perpetuate the difference in treatment between married and unmarried couples, defeating the fundamental concept of independent taxation,’ the report states.