Isle of Man to cap income tax By William Hall, Northern Correspondent
Financial Times Published: February 16 2005 12:38
The Isle of Man, home to some of the UK's wealthiest tax exiles, is planning to impose a cap on personal income tax.
Allan Bell, Treasury minister, announced the plan to make the island more attractive to prospective millionaires and billionaires wanting to reduce their income tax and capital gains tax bills as part of the island's annual budget yesterday.
The 227-square mile island in the Irish Sea, which has built up a flourishing offshore financial services industry, has always attracted tax exiles, particularly from the north-west of England, because of its 18 per cent maximum rate of income tax on a resident's worldwide income. However, the Manx government is proposing to introduce a maximum tax cap in an attempt to attract more high net worth individuals from London and other offshore tax havens.
Mr Bell said attracting more wealthy people would be good for the local economy because they not only bought local goods and services, but frequently invested in more significant ways.
Malcolm Couch, the island's assessor of income tax, has been asked to carry out an "early and rapid consultation exercise" with a view to introducing a "cap on personal tax liability" for wealthy people. Mr Bell said the cap could be justified because they could create new business opportunities.
The Isle of Man, whose economy has been growing considerably faster than the UK economy for many years, has been cutting the rate of corporate taxation steadily since 2002 and plans to introduce a standard zero rate of income tax for businesses by 2006.
It has already introduced a zero rate for the fund management, space and satellite and shipping industries.
Yesterday it extended the zero rate to several other sectors, including films and e-gaming.
Mr Bell said the Isle of Man was already one of the "most business-friendly places in the world" and added: "We want business to blossom in the island."
One Isle of Man tax expert said yesterday that the proposal to cap personal tax liabilities fitted in with the government's plans to boost the island's role as a ship management centre and could appeal to London-based Greek ship owners who were concerned by the UK government's plans to tighten tax rules for non-domiciled residents.
Under current rules, foreigners are not liable to pay UK tax on non-UK investment income, earnings and capital gains, provided these monies are not brought into Britain. Non-domiciled residents are also not liable for UK inheritance tax on overseas assets.
It has been estimated that a tightening of the system could net the Treasury up to £1.5bn a year in additional revenue.
However, there have been concerns that changes in the tax treatment of London-based ship owners could lead to them transferring their business elsewhere.