Isle of Man to launch zero rate tax into space
24th February 2004
In a bid to encourage high technology businesses to locate in the Isle of Man, the 2004 Budget, announced on 17 February 2004 by Treasury Minister Allan Bell, includes the extension of the Island's zero rate of income tax to specified businesses operating within the space and satellite industry.
Bell said, "I intend to extend the existing zero rate to new opportunities as and when they arise. A small but exceedingly promising area is Space and Satellite Technology. This will encompass the manufacture, operation, sale or other activities provided in respect of launch vehicles, satellites or similar assets, including those educational and other training activities that are directly associated with the industry."
The Isle of Man already has a zero rate of corporate tax for the insurance, shipping and fund management industries and for companies operating aircraft to and from the Island.
Other Principal Tax Measures
The Minister described his latest spending plan as "a three-pronged Budget. It supports jobs, improves public services and benefits, and maintains business confidence. We remain on course to deliver the zero tax rate and are laying the foundations for a new era in the economic development of the Isle of Man."
Corporate Taxation
In October 2002, Tynwald (the Manx Parliament) approved modifications to the Island's taxation strategy to meet the requirements of the EU Savings Directive and the Code of Conduct on Business Taxation. The modified strategy is built around a zero rate of corporate tax on all trading income (except for a 10% rate on defined regulated businesses, principally banks). In this budget, further steps have been taken to implement the strategy which is scheduled for completion by 2006.
The lower rate of income tax will stay at 10% for resident trading companies, with the threshold at which the 15% standard rate becomes payable remaining at £100 million. Effectively all taxable trading income is charged at 10%, and this provision is to be extended to non-resident trading companies (previously taxed at 18%). All non-trading income will still be taxed at 18%. This completes the delivery of the tax strategy for the banking industry two years ahead of schedule.
Personal Income Tax
Personal allowances will be raised by 2.8% to £8,225 for an individual and £16,450 for a married couple. The additional allowances for single parents, blind and disabled persons will be subject to a corresponding increase to £5,630, £2,530 and £2,530 respectively.
Personal income tax rates will not change: the 10% basic rate is retained and the threshold at which the higher rate of 18% becomes payable remains, for a single person at £10,000 of taxable income, and for a married couple at £20,000 of taxable income (fully transferable between husband and wife). A single person may have an income of £18,225, and a married couple of £36,450, before paying tax at 18%.
A personal allowance credit, for individuals who are on low incomes and do not fully utilise their personal allowance, was introduced in the last budget. With effect from 6 April 2004, this is to be raised by 11%, providing payments of up to £222.50.
Public Spending
The Minister announced that net spending on public services will rise by 7.3% (£30.7 million) to £448 million, and a capital programme of £98 million will be financed without recourse to external borrowing. Bell reported a probable surplus of £27.7 million for 2003/4 and estimated a surplus of £10.6 million for 2004/5. £32 million is to be transferred to various reserves over the current and next year. This represents a situation that compares favourably with that in Jersey, where the budget deficit is forecast to rise to £28 million by 2008 and where a number of proposals to address the situation are being considered, including cutting income tax allowances for high income households and introducing a sales tax.
Outlook
The budget follows a busy year for the Isle of Man internationally. Agreements were reached with the EU in respect of the Code of Conduct, and the Island's Model Agreement in relation to the Savings Directive (which will be based upon the transitional withholding tax measure) is approaching completion. The IMF Report on the Isle of Man's regulatory regime was received. It confirmed the Island's reputation as a jurisdiction of the highest standing, and its AAA credit rating from both Moody's and Standard & Poors rating agencies has been confirmed.
The Manx economy grew at 3.5% in the current year and is set to grow by 4.5% in real terms in 2004/5. The latest estimates suggest an inflation rate of 3.1% over the past 12 months, and in the region of 3% for the next three years. The unemployment rate is currently 1% out of a workforce well in excess of 40,000.
Bell stated, "This budget is a budget for us all. The modified taxation strategy was developed as a response to external pressures precisely because we needed to protect and develop our economy, the employment it brings and the services it funds. I continue to be encouraged by the number of businesses expressing interest in relocating to the Island as a direct result of our approach. The income tax measures introduced in this budget are a statement of intent that our announced taxation strategy, and its timetable, are still firmly on course for delivery."
For more information contact: Andrew Corlett. |
