So what is the background to GST?
Nations derive income from taxation.  Self sufficiency creates little demand for goods from outside the country.  Only countries large enough to supply a wide variety of goods and services for its population can be self-sufficient.
Jersey is not large and therefore can never be self -sufficient. It must trade with the rest of the world.  Some of this trade is in goods, like the fulfilment industry or agricultural produce, some is the supply of local services, like tourism, and some services provided for non-resident individuals and businesses, as in the finance industry.
The size of our tourism industry is limited by the number of available bed-nights and agricultural exports limited by the amount of land.  Both are further constrained by product demand in overseas markets and competition from other countries.
Jersey’s finance industry does not depend on large capital local assets to provide services. and because Jersey has a tradition of low taxes, the industry now represents some 60% of the Island’s income.
In 1998 the Organisation for Economic Cooperation and Development (OECD) began a campaign to coerce fiscal reform  in a number of offshore jurisdictions, including Jersey, in order to improve transparency. This was further complicated by the EU Code of Conduct on Business Taxation which supported the OECD move.
Failure to address the situation would likely to have initiated action by the U.K. or the E.U.,  and thereby undermine the ability of international financial institutions to operate from Jersey - with serious consequences for the Islands economy. As a result Jersey had to change its tax raising strategy.
The Islands room for manoeuvre was limited by the fact that corporate taxes had been falling worldwide with rates approaching the basic Jersey rate of 20%., and by removing of the exempt company and the international business company, as required by the OECD, it was estimated that the Island would experience a ‘black hole’ in its finances of around £80-£90m.
A range of taxes were examined  as a means of filling this hole. Payroll taxes would effectively tax jobs and could cause unemployment, Capital taxes would affect our competitive position, and an increase in Income Tax undermine our position as a finance centre. Therefore all were rejected.
The only viable alternative was a tax on consumption - GST,  which would widen the Island’s tax base so everyone would contribute, including visitors. It is also a tax strategy where the burden would fall heaviest on those who spend most.
Implementation of GST was agreed in the States on 17th April 2007.   The success of the Finance industry and overall economic growth stemmed from the international perception that an early introduction of a Zero Ten framework would provide long term confidence and clarity.  Therefore whilst the idea of a delay was enticing, it was agreed not to be practical.
The Treasury Minister gave assurances that the rate of GST would be 3% for the first three years based upon on an across the board application. He argued that if exemptions were widely applied then the rate would increase to cover the cost of exemptions.
However, nobody likes paying more taxes  when it appears there is no restraint on States expenditure. The Ministers and the Civil Service seem deaf to calls from several quarters to reduce its overall expenditure. But is must be remembered that calls foradditional services will require exta expenditure. As one States Member commented: “Increases in taxes must be accompanied by a corresponding reining in of States spending, particularly in such uncertain economic times as now”.