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IoM Chief Minister Outlines Agenda For Change

by Jason Gorringe,, London

22 October 2012

Isle of Man Chief Minister Allan Bell has announced that the government is preparing to implement the final stages of the most comprehensive reform of the workings of the government, its social policies, and the tax and regulatory regime, in the past quarter-decade, to bring the island's finances back onto an even keel and to enable the territory to adapt to the changing environment facing international financial centres.

In a recent speech on the island's "Agenda for Change", Bell said that measures taken to date have allowed the territory to meet its end-of-year deficit reduction target, but he cautioned that further measures would need to be agreed to eliminate the deficit entirely from 2015-16. As a consequence, he revealed that the government would release a policy document in December which would outline significant changes to the tax regime to be implemented within a two-year window.

Government objectives include the creation of an income tax and national insurance system "that is fair, simple to comply with, simple to administer and maintains the island’s competitive position," he said. The structure for determining rateable values for taxes on property also requires reform, he added.

"By the end of this administration we will have introduced a fairer and more consistent approach," Bell said. "We are determined that the 'user pays' principle should apply for certain services from both local and central government."

Tax reform aside, Bell stressed that among the most important decisions for policy makers concern how to ensure the territory maintains its strong reputation as a well-regulated, transparent international financial centre.

"The Isle of Man’s economic well-being is highly dependent on its relations with other nations," he said, continuing:

"If we are to safeguard our national future, government must put international considerations at the heart of its work. As a small nation with a competitive tax regime, we continue to be subject to external pressure and scrutiny. That’s not surprising when the global financial crisis has meant higher taxes and drastic cuts to services in many countries. Right around the world and across the political spectrum leaders see a fundamental shift in public opinion."

"The morality of legitimate tax planning is being questioned and the dominant view is that some people and companies are not paying their 'fair share' and that this must change. This change in attitude is being played out in the media, on the streets of capital cities, and in political actions that we ignore at our peril. The Group of Twenty Nations and the Organization for Economic Cooperation and Development are actively advocating a shift away from exchange of tax information on request to automatic exchange of information as the new global standard in international tax co-operation."

"The European Commission is expected to progress a second European Union Savings Directive soon to close existing loopholes and prevent tax evasion. The American Foreign Account Tax Compliance Act, better known as FATCA, will require the automatic collection and sharing of tax-related information with the US authorities. And it is likely that other nations will look for similar arrangements in the future."

"We need to respond to these changes, not simply because it has been our long-standing policy to meet established international standards, but because a failure to do so will damage our economy in the medium to long term."

Bell noted that the Council of Ministers had already agreed the island would negotiate an Inter-Governmental Agreement and an amended Tax Information Exchange Agreement with the United States. However he emphasized that a priority for the future "must be to continue our constructive international engagement to be viewed as a highly competitive jurisdiction with a good tax treaty network, with tax and regulatory regimes that continue to meet international standards and are not harmful to our trading partners, whilst maintaining a sustainable, diverse and growing economy and protecting the island’s own interests".

TAGS: Isle of Man | tax | fiscal policy | banking | financial services | international financial centres (IFC) | budget | offshore | tax planning | tax reform | standards | regulation | services

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