If reports are right that the UK subsidy to the Isle of Man is to be cut by between £50m and £100m then the island will need new revenue.
Its income tax covers both individuals and companies at a tax rate of 18%, in the main. The tax collects £148m this year as opposed to £337m of VAT — two thirds of which is subsidy.
Now, to get that tax back from income tax means an income tax rate of between 24% and 30%. Some tax haven for those who live there.
Which begs the question — how long will local people vote for higher and higher taxes to be able to offer zero tax rates to those who abuse the place where they live? I just can’t see that happening for long. Which is why I predict the Isle of Man will now be joining the likes of Cayman, Jersey and Guernsey as a place likely to internally combust quite soon.
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If there were indeed a shortfall of up to £100 million to be made up, then there are quite a number of ways that could be filled, which do not necessarily involve headline tax rates of 30%. To consider just a few measures, we could:
• Freeze the personal allowance and tax bands for a number of years
• Increase basic rate from 10% to 12.5% and higher rate from 18% to 22.5%
• Increase the standard rate of corporation tax from zero to 5%
• Introduce capital gains tax at 10%
‚Ä¢ Introduce inheritance tax at 10% on estates over £1 million
‚Ä¢ Restrict mortgage and loan relief to basic rate and reduce the maximum deduction from £15,000 to £5000
• Increase the upper limit for national insurance contributions to the UK level
• Remove the concession whereby the self-employed can treat their Class 4 NIC as tax-deductible
‚Ä¢ Increase the cost of work permits for newcomers from £25 to £250
Of course, the other possibility is to trim government spending. One golden opportunity is government itself. Why a nation of 80,000 people needs 24 separate local authorities plus the world’s only tricameral parliament is beyond me, and some rationalisation in the delivery of services in that area could produce significant results.
Finally, I’m slightly baffled by the overall tenor of your posting. A higher rate of tax of 24% or 30% is certainly not as attractive as 18%, but it’s considerably lower than the 40% to 50% payable in the UK, so why do you think people are likely to feel hard done by?
As the Isle of Man must run a surplus, the public sector is going to have to be slashed to pieces, and their final salary pensions decimated. It will be painful for everyone, but far more so for those in the bloated public sector.
Again Richard you seem to live in some bubble that says revenues will stay the same no matter what taxes are raised, may be move to the real world.
In nearly all cases increasing taxes enough leads to less taxes raised. This is more so in small jurisdictions.
So in the end the more the UK squeezes the IOM to raise their taxes, the less taxes they will raise, resulting in a lager subsidy from the UK,
But then that is what you enjoy forcing others to rely on the state to live and to be a burden on others.
Most people (especially the industrious Manx) just want a chance to make a reasonable living in their country, that has already had it’s resources plundered but the British.