NEW-STEALTH-TAX-ON-JERSEY---WOLF-IN-SHEEP'S-CLOTHING

NEW STEALTH TAX ON JERSEY – WOLF IN SHEEP’S CLOTHING?

03.08.17

Jersey is known as a playground for the rich. The opulent mansions, yachts and private jets that adorn its land, sea and sky are a constant reminder that the island’s community includes a disproportionate number of millionaires and billionaires attracted by its tax-haven status.

The capital, St Helier, is one part quaint seaside town and one part world-renowned financial services hub. It is a place where Victorian buildings are harmoniously juxtaposed by the high-spec glazed offices of the banks, lawyers and accountants on the Esplanade. But St Helier has not always been so glamorous.

The German occupation during the Second World War had a devastating impact on the town and by the 1970s decades of neglect and under investment had left St Helier in a sorry state of disrepair. In the decades since, however, it has undergone a transformation. Visitor numbers have increased as a result of a concerted effort by its government, the States of Jersey, and construction - now up on pre-recession levels - is booming.

Buoyed by the island’s good fortunes, further regenerating St Helier is one of the States’ key policies. The problem is that it does not have the funds to pay for it. Cue the Jersey Infrastructure Levy (JIL), a controversial tax on developers being drawn up, which has been dubbed by some of the island’s property fraternity as a “stealth tax”.

So how would the levy work? And what effect would it have on the island’s property market if it comes into force

The brainchild of the States of Jersey’s minister for environment, deputy Steve Luce, the levy would tax developers £85/sq m on buildings of more than 75 sq m, 90% of which would go directly towards the regeneration of St Helier and the rest to the island’s parishes.

“We’re headed towards a much greener town with more community and living space,” says Luce. “We have a vision to create a more attractive place with better cycling and pedestrian access, wider pavements, better public realm, more trees, benches and amenity space, and fewer car-parking spaces. That’s our vision for the future but it’s something we don’t currently have funding for.”

The JIL consultation process began on 23 June and will run until 1 September. Already, several local developers, agents and architects have raised concerns.

Ben Ludlam, group property director at family-owned investor and developer Le Masurier, has been particularly vocal in his disapproval of the government’s plans.

“The government is in a situation where it can’t fund one of its four strategic objectives,” says Ludlam. “It is desperately trying to shake money from the tree to start this regeneration but it would need millions to do it. All it’ll do is put in some nicer granite pavements and a bit of public realm and plant a few trees; it won’t be big-ticket stuff. It won’t build a new car park, which is what we really need.”

One of Ludlam’s concerns is that while some of the details of the levy have been published, “it isn’t entirely clear how it will work”.

Luce and his colleague Ralph Buchholz, Jersey’s Island Plan project manager, are adamant that the levy will be fair, transparent, easy to calculate and affordable. Luce points to a wad of paper on his desk that contains the viability study and calculations that are the “bedrock” of the levy.

He stresses that extensive work has gone into the calculations, which have been updated to include the higher inflation and build costs that have come as a result of the Brexit vote, and have also undergone stress tests. He is “determined the calculations will be accurate and defendable”, and insists the levy is “conservative” and would leave developers with a minimum profit of 20%. The levy will hit land prices, Buchholz adds, and is not a tax on developers.

This last claim is countered by Steve Marie, managing director of local developer Comprop. “If it’s a land tax, then tax those who are selling land,” he says. “It doesn’t wash with me.”

Other developers, too, are yet to be convinced by the government’s claims. Ludlam points out that the cost of development in Jersey is high anyway because of the locality - the vast majority of materials have to be imported and population rules put a threshold on the number of people construction companies can employ. What with inflation and the increasing cost of materials, Ludlam says the costs to build are 25% to 30% higher than they were six to nine months ago.

“And the government wants to put a tax on top,” he says, adding that the levy is a matter of trying to score political points ahead of Jersey’s election next May. “We’d be in danger of going from boom to bust again.”

Do you agree? Get in touch with Abode2.

Abode Affiliates

  • Cornerstone Tax Advisors
  • Strutt and Parker
  • Ultra Villa
  • Dominic McKenzie Architects
  • Crane Resorts
  • Pedini London
  • Rosemont Consulting
  • Wings
  • Smart Currency Exchange
  • Heron Real Estate
  • BDO
  • St Edward
  • Knight Frank
  • Enigma Yachts Limited
  • Cyan International Properties
  • Alexander James
  • Gama Property
  • Yoo
  • Ibiza Transit Express
  • RDO
  • MAS Marbella
  • Touch Design Group
  • Habitat First Group
  • Edenhurst
  • Alleyne Real Estate
  • London Fractions
  • Dost & Co
  • Wall Street Luxury
  • Unique Home Stays
  • Lida Cucina
  • Moore Stephen
  • Isle Blue
  • Luxury Italian Living
  • Dimora
  • St Francis Links
  • Prestige Architects
  • The Hideaways Club
  • Luxe Caribbean Properties
  • Jumeirah
  • Worldwide Property
  • Worldwide Dream Villas
  • Oyster Yachts
  • Coldwell Banker
  • Chamonix Ski Chalet
  • Panorama
  • Blevins Franks
  • Smart Living
  • MG&AG
  • Monaco Real Estates
  • Harry Manning
  • Destinology
  • 7Storeys
  • The Coastal House
  • CID

Enter your dream destination