The Income Tax (Amendment) Bill 2004
16th February 2004
The latest of a series of Bills intended to simplify the Isle of Man income tax system and facilitate the implementation of international agreements, has received its first reading in the House of Keys (the lower house of the Isle of Man's Parliament, Tynwald).
Isle of Man Treasury Minister Allan Bell said, "The Income Tax Amendment Bill continues the modernisation of the Island's tax system by making it simpler, fairer and consistent with international standards. This is very much in line with the tax strategy approved by Tynwald".
The provisions of the Bill (subject to approval by both houses of Tynwald) will:
- extend the current-year basis of assessment for individuals and other non-corporate taxpayers, which already applies to employment income, to all income;
- give taxpayers until 6 September to submit their tax return (extending the period from three to five months);
- from September 2005, subject those making overdue returns to a £50 fine. Failure to make a tax return within two years of the end of a tax year will be a criminal offence;
- make personal allowances available to non-residents;
- prevent tax-avoidance by company directors, for instance, using company loans to take advantage of the disparity between personal (currently 10% standard rate, 18% higher rate) and corporate income tax rates (the latter due to be reduced to 0% by 2006);
- give new powers to the Assessor of Income Tax to obtain information and documents, relating to a person's tax affairs, from the taxpayer and third parties (including his/her tax advisers). Advisers will not be compelled to disclose communications with the taxpayer, the purpose of which is the giving or obtaining of advice relating to the taxpayer's affairs; and
- extend the purposes for which a temporary taxation order may be made to include the implementation of, or compliance with international and intergovernmental taxation agreements, arrangements, obligations, regulations, directives, codes or standards, and the international exchange of information and documents to aid such implementation or compliance. The temporary taxation order process enables urgent changes to be made to tax law by means of orders approved by Tynwald, although such orders lapse if the related primary legislation does not reach the second reading stage within 12 months.
The Assessor of Income Tax's new powers to obtain documents are seen by the Treasury as being consistent with the Isle of Man's commitment to the OECD. The Island is prepared, on a bilateral basis, to negotiate a tax information exchange agreement with any OECD member country that requests one. In April 2002, the OECD published its model Agreement on Exchange of Information on Tax Matters, which the Island helped to draft, and six months later, the Isle of Man and USA entered into an Exchange of Information Agreement, based on the model. The agreement provides for a bilateral exchange of information following a formal request being received by the competent authority in the Island. The request must be made on a specific case basis and the subject of the request must be under investigation in the requesting jurisdiction. Other safeguards are included to prevent 'fishing expeditions'. The information exchanged is confidential and may not be disclosed to any third party. The agreement with the USA had effect from 1 January 2004 in respect of criminal tax matters and will have effect from 1 January 2006 with respect to all other tax matters.
The Treasury Minister added, "The people of the Isle of Man are entitled to an income tax system that works as efficiently as possible and collects all the money that is owed to public funds. Manx rates are low compared with other countries and it is not unreasonable to expect payment of what is due. It is also important for the reputation and stability of the Island that we have the ability to honour our international agreements."
For more information contact: Mike Edwards. |
