The Isle of Man Government has recently published its annual budget report for the year 2013-2014. In the report, the local government evidences its commitment to readdressing some imbalances that have been affecting the economy of the island.
Overall, the initiatives and changes proposed have the objective of developing further the economy of the Isle of Man, to attract visitors and investors, and to provide a better quality of life to its residents.
Here is a summary that highlights the main elements of the 2013-2014 budget, as well as an overview of the key economic figures that are significant to visitors and residents alike.
An overview of the Isle of Man’s budget for 2013-2014
The Isle of Man Government is currently implementing an economic plan that aims to reduce government expenditure while estimulating economic growth by 2016. During the financial year 2013-2014, the local government estimates that it will have an additional income of £44 million.
So far, the government has also been successful in reducing public deficit to meet the projected figure of £47 million. These figures have been made possible thanks to an increase in direct taxation and to a reduction in staff costs. The additional income has been already been put to good use by increasing the amount spent on benefits by 5 per cent, mainly in state pensions and pension supplement support. Public health expenditure is also up by 2.5 per cent.
Modifications to the corporate income tax rate
The Isle of Man is known throughout the world for its low taxation status. Since taxes like stamp duty, capital gains, or wealth tax are not applicable in the island, the Isle of Man has become a hub for offshore banking activities and a corporate tax haven. Taxation matters in the Isle of Man are governed by the Income Tax Act of 1970, which estipulates that only individuals are subject to income tax, whose levels are capped at 20 per cent, with personal and joint tax allowances of £9,300 and £18,600 in each case.
The Act also points out that corporate income tax is only applicable to the profits made by banking institutions and to any income derived from the rental of properties or land in the island. In cases like this, corporate income tax is set at 10 per cent.
However, the 2013-2014 budget has proposed a significant change in this respect, as the local government now intends to make the 10 per cent corporate income tax rate applicable to all businesses involved in the retail sector, as long as they have annual taxable profits that exceed £500,000. This change in tax law aims to make taxation simpler and fair, and also to increase the levels of economic contribution made by local businesses so that more income is available to carry out other social and economic regeneration projects in the Isle of Man. According to the budget report, with this strategy the government plans to collect an additional £1.2 million in tax.
Other important aspects of this year’s budget
-an injection of cash (£97 million) into the Government Capital Programme, which will be mostly used to fund construction and social housing schemes
-an increase of 3.1 per cent in the budget allocated to education and the inclusion of a free student loan scheme
-the extension of the National Insurance Holiday scheme to April 2015, in order to encourage job creation
-a rise in the Nursing Care contributions, which is set at £110 per week
The report shows that all governmental departments will benefit from an increase in their allocated budget. It is expected that the subsequent improvements in health, infrastructure, education, economic development, and overall quality of life will attract more businesses and individuals to the Isle of Man.