Isle Of Man Cuts Corporate Taxes In Budget

Tax-News.com, London

20 March 2002

The Isle of Man Treasury announced its budget for the 2002-03 financial year yesterday, and highlights include:

• Lower business income tax rate cut from 12% to 10% and top rate from 18% to 15%;
• 9.5% (£33.6 million) increase in revenue spending on public services;
• £25 million Media Development Fund to attract 'big budget' film makers to the Island.

Treasury Minister, Allan Bell MHK, said: "The 2002 Budget enables us once again to reduce direct taxation, to significantly increase spending on Government services and increase reserves for improved financial strength, economic diversification and future infrastructural development.

"It is designed to build upon our current prosperity, to enhance further the standards of living of all our citizens and to enhance our reputation as a well regulated and progressive jurisdiction that is truly open for business."

Mr Bell told Tynwald (the Isle of Man's parliament) that the standard rate of tax for resident trading companies and individuals is to be reduced from 12% to 10%. The top rate for trading companies is to be reduced from 18% to 15% - the top rate for individuals will remain at 18%. These cuts fulfil key aspects of the Isle of Man Government's taxation strategy well ahead of schedule. The company taxation cuts will be worth £7.3 million to businesses.

As well as tax cuts, the Treasury Minister announced a 9.5% (£33.6 million) increase in net spending on public services bringing the Isle of Man's total spend to £388 million. This works out at in excess of £5,000 per capita - over £1 million each day of the financial year 2002-2003. Part of this increase in funding will pay for an extra 150 Government workers, the majority of which will be health workers and teachers.

New incentives will be put in place to attract big budget films to be made on the Isle of Man. A £25 million Media Development Fund aims to build on the existing success of the Island's film and media industry. This money will help investment in films as well as developing an infrastructure which will allow more film industry activity on the Island.

The Isle of Man's strong economic growth has allowed for a capital projects programme of £148 million to be financed without the need for external borrowing. A £16 million surplus is expected and nearly £91 million is to be transferred to various Reserves over the current and next year.

Other budget measures include:

• Increase in personal allowances by 3.9%;
• A new £20 million Housing Reserve Fund to finance additional housing projects to be progressed by the Department of Local Government and the Environment;
• Extension of a zero rate tax to insurance and shipping companies;
• £3.75 million more for the Tourism Development Fund;
• A £2 million transfer to the E-commerce/ICT Fund.

When the Manx Government's taxation strategy was approved by Tynwald in October 2000, its key targets included the reduction of standard income tax rates for businesses and individuals to 10%, within three to five years. The 2001 Budget cut the standard rate from 14 to 12%.

The strategy aims to secure future prosperity by keeping the Island attractive to business in a changing and competitive global economy. The Manx Government has been able to reduce income tax while increasing public spending and reserves because of strong economic growth boosting its receipts.

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