Isle of Man must 'prepare for greater transparency'
Offshore financial centres will come under continued international pressure to be more open in their affairs, the Isle of Man (Other OTC: MAGOF.PK - news) treasury minister Eddie Teare warned this week in his annual Budget speech
He told the Manx Parliament, the Tynwald there was much “ill informed comment “ about “so-called tax havens” but he expected further international initiatives on tax issues which would affect offshore centres.
He added: “I expect to see in the coming years new approaches to information exchange, new forms of international agreement, additional requirements regarding the ownership of business and investment structures and further pressure for greater transparency. We do not need fear these developments, but we need to be fully aware that they are coming, to continue to participate, to influence the outcome wherever we are able to, and to accept that if there are “rules of the game" which apply to the global marketplace then we will have to follow them “.
The island has already signed Tax Information Exchange Agreements with 25 countries. An agreement with China comes into force in April, and Manx law firm Applebys is opening an office in Shanghai in anticipation of more commercial business from mainland China. The firm is already established in Hong Kong.
The Budget contains only minor tax changes, with tax allowances frozen at present levels, and personal income tax rates unchanged at 10 per cent standard rate and 20 per cent higher rate. However, the very rich will pay a little more tax as the “tax cap”. which limits the amount of income tax paid by individuals. will rise from £115,000 to £120,000 .The amount of extra revenue raised will be only £375,000, which suggests fewer than 100 residents benefit from the tax cap.
The standard rate of company tax remains at zero but the Minister warned of anti-avoidance measures if individuals try to shelter personal income through companies.
Interest and dividends and pensions paid to non-residents, including British expats who hold savings and investments on the island, remain free of Manx tax.
The Manx government is cutting back public spending, after the UK Treasury reduced the Manx share of Value Added Tax receipts, a move which could cost the Isle of Man up to 25 per cent of its tax revenue. Mr Teare said this week that the fall in VAT receipts was not as much as feared, but he is still cutting public spending.
The Isle of Man lost its AAA rating for government debt last year, but it roughly balances its budgets, with an unemployment rate of 2.5 per cent and economic growth this year estimated at two per cent. But its inflation rate is higher than on mainland UK, having peaked last August at 6.8 per cent and currently four per cent.
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Isle of Man must 'prepare for greater transparency'