Manx Budget Prompts Jersey To Consider Tax Review

Amanda Banks, Tax-news.com, London

08 March 2001

The Isle of Man's budget, presented last month, has prompted an initial response from Jersey's finance president, Senator Frank Walker, who says businesses based in Jersey or those thinking of setting up in Jersey could now be lured away to the Isle of Man and his government will not allow such a 'significant competitive advantage' to take place.

This is according to an article in the Isle of Man press in which Senator Walker says of the Manx budget: 'It is possible that in one way or another we will have to try to react in the near future ... we are not going to sit back and allow the Isle of Man to develop a significant competitive advantage - the trend is clear and we are not going to allow too much clear water between their tax rates and ours - for both personal and corporate rates.'

The central element of the budget was a significant two per cent cut in the Isle of Man's income tax rates. The standard rate is to come down from 14 per cent 12 per cent - with the top rate reduced from 20 per cent to 18 per cent - for both individuals and businesses with effect from April 6 this year. Personal allowances are increasing by 2.2 per cent. The changes, in line with the Government's announced tax strategy, will mean a total £10.5m off personal tax bills and a £7.4m saving for companies.

In addition, trading companies will pay the lower rate on the first £500,000 of their taxable income (previously £125,000), so that 76 per cent of local companies will be exempt from the higher rate.

Senator Walker said Jersey must respond by performing a review of its own tax structure. The island currently has a flat tax rate of 20 per cent but Senator Walker said: 'I would not like to see our effective corporate or personal rates get too far out of line so that in tax terms we are seen as uncompetitive.'

'There are many other considerations,' he continued. 'I have every confidence that Jersey will continue to be the location of choice for financial institutions already here and many that are considering where to go. You also have to remember that the Isle of Man has VAT, which is an additional burden on businesses and individuals that we do not have. However, there is no room for complacency and to ignore it would be quite wrong.'

Recommended