In addition to the headline-grabbing news that the island is to abolish elements of its tax code that have been criticised by the EU – in order to keep its business-friendly zero-10 corporation tax regime – there was no change to the island’s income tax rates, thresholds or personal allowances.
It was the first budget for Craine, and comes as the island continues to fight for its financial footing following the UK’s unexpected change of a long-standing VAT-sharing arrangement in October 2009, which resulted in an immediately loss of almost £100m in income the first year, and £140m thereafter – or about a fifth of the annual total.
Craine told Tynewald that gross spending for 2011-2012 was being held at the same level as two years ago, while savings for the year would be £11m more than the original £40m target.
Staff costs had been cut by 8% or £26m; a freeze on government employees’ salaries is to continue, and more staff will be cut, taking the total number lost over the two year period ending in April 2012 to almost 400.
Also in the budget:
• Mortgage interest and relief is being cut further, to £7,500 per person per year, which is expected to bring in an extra £490,000
• Net spending on health is being increased by £7.5m or 6.5%
• The personal allowance credit is being increased by 7.7% for the less well-off, paid to more than 11,000 people a year
Zero-10 retention ‘a boost’
Craig Brown, director of IOMA Solutions, an Isle of Man insurer and financial product provider, said that although it would be “overly dramatic” to say that Craine’s plan to retain the Isle of Man’s zero-10 regime would automatically preserve its international competitiveness, “it certainly removes a barrier to businesses thinking of relocating to the island and should be a boost to the local financial industry”.
“This new certainty, when combined with the stability of the Isle of Man tax system and the equity of treatment of taxpayers, demonstrates that the island is a serious player in the international financial sector,” Brown said, adding that it was to be hoped by islanders that they would “begin to see an influx of new business”.
The rest of the budget held few surprises, Brown noted, though he said it contained “a number of positive messages”, including the fact that an expected transfer from the island’s reserves of £114m over the next five years in order to balance the budget “now appearing increasingly unlikely”.
To see the more about the Isle of Man’s budget on the government’s website, click here.
