Fears Over Island's Vat Deal

[Matt Bawden]

Does anyone really give a flying fuck? Adapt to your environment, there are too many wankers driving around in Aston Martins on this island anyway, this sure as hell ain't Monaco...the weather is shite!

[manxman8180]

Remember the mining towns decimated in the early 80's?

 

Any change or even removal of the VAT agreement could have a dual impact; it will firstly dramatically cut IOMG's revenue stream (does anyone know how must VAT we collect as against how much we get back, i.e. if we charge our own equivalent of VAT will this be anywhere near the amount we get from the agreement?) and secondly, and this is where I think Brown and Darling are hoping for the biggest effect, in order to plug the hole IOM direct taxes will have to be increased.

Aye, I was going to ask something along those lines. Is there a forum boffin who could try and offer up some workable figures? Is it still worked out via that random survey that comes round every once in a while that asks about household expenditure?

 

I remember saying that it would work nicely if everone said they drank 2 bottles of Whiskey and smoked 100 fags a day......

 

I've just done a quick search and I couldn't find the official figures very easily (i'll look harder tomorrow!), but I came across another forum discussion where a figure of £75bn was said to be colllected in 2006. So let's say that now stands at £80bn, based on a UK population of 62 million, that equates to a VAT take of about £1200 per head.

 

With an IOM population of 76500, using the above calculation would raise around £92 million. And we get around £300 million? Jeez, I think we're fucked.

 

Of course the agreement also covers duties on fuel, fags and booze etc.

 

UK fuel duty raises about £25bn and tobacco and alcohol somewhere around £10bn each. So using the shoody maths above tha equates to about another £55million.

 

So about 150 million all in. Even factoring in the GDP part of the agreement, say that we are roughly running at 110% of UK GDP, tha wouls only give us another £15 million.

 

Which leaves us about £135 million short. Every year. Shall we start a forum collection?

 

Makes spending £40 odd million on 10 yards of runway look like an even better investment eh.

[Gladys]

Well, its interesting that you say that Pongo, because that is what was said on MR this evening - that contingency plans are in place. Do you reckon that they are and that we have the right people to negotiate as opposed to capitulate?

 

I have a lot of faith in Malcolm Couch, but as this is indirect tax does it fall within his remit in terms of advising on policy?

[Gladys]

Does anyone really give a flying fuck? Adapt to your environment, there are too many wankers driving around in Aston Martins on this island anyway, this sure as hell ain't Monaco...the weather is shite!

Never really saw why people had such a pop at you, but can see it now. We are not talking about Aston Martins, we are talking about enough revenue for IOMG to continue educating our children, treating our sick, supporting the less advantaged, and providing the other public services that we benefit from everyday but probably don't even notice. It is also about the continuing buoyancy of our economy to make sure the majority of those of employable age have a job.

 

Dick.

[Roger Smelly]

Well reading between the lines here but here goes.

 

I have been watching this Vat arangment for a few years now and the way i look at is this, the manx government have seen this as the goose that laid the golden egg once every 12 months.

 

Now they have used it for updating the infastructure and wasted it on other mindless things.

 

For years they have said the island is doing well etc.etc and basically not worried.

 

Now i think the island is finally going to see the sh*t hit the fan.

 

instead of investing the money they have wasted it and the annual government bill has risen and risen.

 

Something has got to give folks, maybe the bubble they are in is about to burst?

[Tugger]

They have to slash expenditure, and quickly. You can be sure that direct taxes are on the way up as well, but there's no way they can squeeze enough out of us to make up the difference.

 

I agree, they should have had this money invested, not in stupid runway extensions but in something that would provide a buffer

[Gladys]

Remember the mining towns decimated in the early 80's?

 

Any change or even removal of the VAT agreement could have a dual impact; it will firstly dramatically cut IOMG's revenue stream (does anyone know how must VAT we collect as against how much we get back, i.e. if we charge our own equivalent of VAT will this be anywhere near the amount we get from the agreement?) and secondly, and this is where I think Brown and Darling are hoping for the biggest effect, in order to plug the hole IOM direct taxes will have to be increased.

Aye, I was going to ask something along those lines. Is there a forum boffin who could try and offer up some workable figures? Is it still worked out via that random survey that comes round every once in a while that asks about household expenditure?

 

I remember saying that it would work nicely if everone said they drank 2 bottles of Whiskey and smoked 100 fags a day......

 

I've just done a quick search and I couldn't find the official figures very easily (i'll look harder tomorrow!), but I came across another forum discussion where a figure of £75bn was said to be colllected in 2006. So let's say that now stands at £80bn, based on a UK population of 62 million, that equates to a VAT take of about £1200 per head.

 

With an IOM population of 76500, using the above calculation would raise around £92 million. And we get around £300 million? Jeez, I think we're fucked.

 

Of course the agreement also covers duties on fuel, fags and booze etc.

 

UK fuel duty raises about £25bn and tobacco and alcohol somewhere around £10bn each. So using the shoody maths above tha equates to about another £55million.

 

So about 150 million all in. Even factoring in the GDP part of the agreement, say that we are roughly running at 110% of UK GDP, tha wouls only give us another £15 million.

 

Which leaves us about £135 million short. Every year. Shall we start a forum collection?

 

Makes spending £40 odd million on 10 yards of runway look like an even better investment eh.

Thanks Manxman, me mind is going to be boggled!!

 

The figure I heard that was vulnerable is the £100m we receive. Now, I don't know if what that represents, who does? But in my simple world, we have a potential drop in revenue of £100m. Now if that is because we collect, say, £150m, then first reaction is to say F off to Whitehall, we can introduce our own VAT system where we keep everything and you get nowt. However, if within that £150m is a substantial element which would only appear on our books because we are an offshore within the UK VAT area, then we have to immediately discount that element, because without the UK reclaim that asset may never be bought through the IOM. Quantifying that element is the tricky bit because it actually gives you the benefit of staying within the UK VAT area.

 

I am definitely no expert in this, but there does seem to be some benefit, but we have to understand the cost.

[Tugger]

exactly - if the UK government plays hardball they can insist that we subsidise them, just for the benefit of piggybacking their VAT treatment

[Albert Tatlock]

My take on all this is:

 

That the VAT agreement will be effectively scrapped (UK giving notice on it), so visitors won't count as 0.18 residents in the sharing calculation anymore. That the guesstimated figure of between £50M and £100M to our detriment being mentioned doesn't directly relate to the current resident population (currently including visitors for sharing purposes), because there are also a number of VAT's that do not go into the sharing pool in the first place e.g. financial services, gambling, film-making etc. Plus other VATs are calculated in the pool by actual consumption e.g. petrol, oil, heating oil (about £30M I understand) etc. But without seeing the actual breakdown of what VAT we actually raise here and in what form, no one other than Tony Brown/Treasury who have access to the figures can possibly calculate the damage properly IMO.

 

I also think there is an impact here less mentioned, but still important in all this, relating to associated changes happening in the common services agreement too e.g. health, defence etc. - which will have a negative effect on the balance of payments too.

 

But VAT agreement scrapped/changed or not, that we would still remain part of the customs union.

 

Putting £50 to £100M in perspective, £127M is all of the resident income tax raised each year on the island, £100M is about 1/6th of the governments income - as Gladys said, equivalent to our education expenditure - or half the health service.

 

The real questions I think to be asked now are: how do we replace £100M? how do we save money on capital expenditure and the government pay roll? (hint: time for that all too overdue assessment of government employees many of us have been banging on about for years). But if we raise taxes we'll simply implode by throwing away all too many of our advantages and people and companies will simply move to other jurisdictions, if we offload government employees it will cost us a fortune in benefits and redundancy, along with the inevitable house price crash and negative equity for many that would follow etc.

 

The only real answer IMO is a very different approach, 1. quite severe cuts, 2. a committment to e.g. a 5 year plan to do far more varied high-value product manufacturing here, as UK taxes rise, getting more companies to relocate here, allocating something of the order of £200M over that period to build the infrastructure and funding enticements to get them here (along with a well thought out and strategic immigration policy), where VAT from their products would go into our pot and (maybe) 3. if the UK are breaking agreements, e.g. open up our 12 mile limit for oil/gas exploration and get something in from that. By setting our own tax levels lower than those in the UK, there are far more things than we can offer - so get your thinking caps on

 

Oh...and in two years time at the election, the biggest turnover of complacent money wasting MHKs that has ever been seen previously on this island.

 

.

[Slim]

My take on all this is:

 

.

 

That's about the size of it I think Albert. I wonder if this is tied up to a possible raise in vat to 20%?

[ian rush]

VAT re-neg and removal of reciprocal health cover - related, no?

[wazir]

Even more gloom.

 

Even IF we can plug the gap with some form of taxation (which will have to be a domestic sales tax IMO) so much of the finance business here has chosen the Isle of Man because (1) it has 0% tax and (2) expenses in Europe are recoverable. Since (2) is not going to be true I realistically thing that there will be a significant exodus of companies....

 

On the otherhand it might be compensated for not having VAT - look at Gib and the Channel Islands...

[Slim]

On the otherhand it might be compensated for not having VAT - look at Gib and the Channel Islands...

 

How does it work using mail order in the channel islands? Does every site have to know if you should be charged vat or not?

[pongo]

In vaguely related news the EU appears to be moving towards effectively rejecting Guernsey+Jersey's 'Zero Ten' tax initiative.

[Slim]

In vaguely related news the EU appears to be moving towards effectively rejecting Guernsey+Jersey's 'Zero Ten' tax initiative.

 

http://www.thisisguernsey.com/2009/10/14/e...hes-tax-attack/

 

Nice to see Murphy there in full blown smugness.

 

I assume this is Tony Browns fault too?