Isle Of Man To Cap Personal Income Tax Liability

by Jason Gorringe, Tax-News.com, London

18 October 2005

The Isle of Man Treasury Department has outlined new proposals for the capping of personal tax liabilities in a bid to attract greater numbers of high-net-worth individuals to settle on the Island.

In a public consultation on the subject, views were sought in relation to the level at which the tax cap should be set. Amounts of £100,000, £150,000 and £200,000 had been suggested in the consultation document.

Currently resident individual taxpayers are subject to income tax on the whole of their income after allowing for certain deductions and a personal allowance of £8,500. The first £10,300 of taxable income is charged at lower rate of 10%, with the balance being charged at 18%. Allowances and lower rate threshold are double for married couples who are assessed jointly.

Four responses suggested that the level of the cap should be £50,000, one £90,000, four £100,000, one £200,000 and one £250,000. One individual suggested that the tax cap be set as high as possible to attract only the very wealthy to the Island.

Respondents also raised the issue of fairness, although the Treasury argued that a tax cap would benefit the Manx economy overall, whilst maintaining the Island's attractiveness to wealthy individuals and entrepreneurs compared to other low tax territories, such as Guernsey, Jersey, Monaco and Switzerland.

"It is recognised that currently a tax cap will only directly benefit a small number of the wealthiest residents on the Island. However, Treasury believes that indirect benefits will be available to Island as a whole," the Treasury sated.

While the IoM Treasury has yet to determine the level at which the tax cap will be set, it has nevertheless indicated that it wishes to see the measure introduced "at the earliest opportunity," depending on the prevailing economic circumstances. The measure would require the approval of the Tynwald before implementation.

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