IOM Proposes Zero Income Tax For Businesses

by Amanda Banks, Tax-News.com, London

25 June 2002

The Isle of Man has become the first of the UK's Crown Dependencies to offer a response to the European Union's Code of Conduct on Business Taxation, according to a report from the Isle of Man Online news service yesterday.

Although Jersey and Guernsey have both now agreed to exchange information of the savings interest of non-residents, neither of the Channel Islands is understood to have offered suggestions on the more contentious issue of business tax reform in order to pacify the EU.

However, in what he called an 'elegant solution', the Isle of Man's Treasury Minister, Allan Bell has proposed a zero corporate tax rate for all companies based on the Island, in order to bypass the threat posed by EU rules to the jurisdiction's exempt company regime.

According to the IOM Online report, companies regulated by the Financial Supervision Commission and the Insurance and Pensions Authority will be charged a fee, the proceeds from which, it has been estimated, will largely offset the loss of corporate tax revenue. All other businesses will be subject to zero rates of corporate income tax.

Citing a press release issued on Friday, the online news service quoted Mr Bell as revealing that the formulation of a viable alternative to the exempt companies regime was 'the most important decision Tynwald has to make during the lifetime of this house and probably way beyond that.'

The press release went on to state that although the Isle of Man does not belong to the European Union, the Manx authorities recognise the need to 'constructively engage' with EU initiatives, explaining that the requirements of the Code of Conduct 'can be accommodated within the Island's evolving tax strategy'.

'The creation of a zero corporate rate applied to resident and non-resident businesses alike would preserve the international business we would wish to retain, allow the economy to diversify still further, and give the Island a powerful competitive advantage for the future, albeit with some initial loss of revenue,' the Manx Treasury Department revealed, adding that: 'Such loss of revenue is not considered as significant and will not affect our AAA rating.'

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