Review Of Business Taxation System

[bluemonday]

Consultation document at

http://www.gov.im/lib/docs/treasury/incometax/consultations/iombusinesstaxsystemreview.pdf

[Chinahand]

An interesting and quite sobering read.

 

Important, hard issues are going to have to be faced and dealt with.

 

To be blunt a very very large chunk of our economy is here because of our tax system - and those companies make most of their money elsewhere and so other countries want a pound of flesh for themselves.

 

The IOM is involved in a high stakes game with powers far larger than it.

 

We are a scrap to them, but the economy and lifestyle of the island would be more than decimated if we implemented, or they imposed, a bad solution to this problem.

 

Issues of soverignty, fairness, and greed.

 

I wonder how it will resolve?

[b4mbi]

Agreed CH. Just read it.

 

We have to face facts that the overriding reason why many businesses are here due to the favourable taxation regeime in place.

 

Altering this substantially could have catastrophic effects on many aspects of living here.

 

The consultation I feel places too much emphasis on trying to keep the EU happy, we're operating in a global market place now where geographic considerations are not as important for the type of services we offer.

 

We're never going to have heavy industry or large manufacturing base here.

 

There are other jurisdictions that have less regulation and controls than here that are non EU based, yet have a similar tax strategy, so should also be looking at these jurisdictions as comparison.

 

I would place a bet that all EU jurisdictions offer tax incentives of one variety or another to various industries within their nation.

 

Interesting times.

 

 

 

 

[Lost Login]

Agreed CH. Just read it.

 

We have to face facts that the overriding reason why many businesses are here due to the favourable taxation regeime in place.

 

Altering this substantially could have catastrophic effects on many aspects of living here.

 

The consultation I feel places too much emphasis on trying to keep the EU happy, we're operating in a global market place now where geographic considerations are not as important for the type of services we offer.

 

We're never going to have heavy industry or large manufacturing base here.

 

There are other jurisdictions that have less regulation and controls than here that are non EU based, yet have a similar tax strategy, so should also be looking at these jurisdictions as comparison.

 

I would place a bet that all EU jurisdictions offer tax incentives of one variety or another to various industries within their nation.

 

Interesting times.

 

For years the IoM Government have bosted about being aheard of the game etc, and where has it got us, basically absoultely nowhere. Yes pressure to change is coming and eventually it will be irresitable so we should have our plans in place, but for once can we not rush to make changes as from what I can see it really seems to have made not a jot of difference. We get a pat on the head, we wag our tail and then the EU etc carry on applying the pressure as before.

[Slim]

For years the IoM Government have bosted about being aheard of the gave etc, and where has it got us, basically absoultely nowhere.

 

Are you sure? Low unemployment, high gdp per head, expensive facilities vs population. I wouldn't say the successes of the past have got us nowhere.

[Twitch]

Can somebody tell me (I don't know the answer honestly) how we coped before zero ten came about in 2006?

 

And if we have to levy e.g. 5% corporate tax, is that such a bad thing, as wouldn't it compare well internationally?

[pongo]

For years the IoM Government have bosted about being aheard of the gave etc, and where has it got us, basically absoultely nowhere.

 

Are you sure? Low unemployment, high gdp per head, expensive facilities vs population. I wouldn't say the successes of the past have got us nowhere.

 

The policies which have evolved since WW2 and especially since the 1960s and even more especially since the 1980s have brought the island via a very pretty route to the edge of a cliff IMO.

 

One of the problems as I see it is that we are several generations of politicians into this now - the ideas of the 1980s are now accepted as truths. There is no alternative political perspective or school of thought.

 

The island might* have been much better off if it had joined the UK years and years and years ago. By now it would not even be an issue and we would take it for granted. The ferry would probably be subsidised and we would have a smaller population .. and a smaller economy too. We would have regional aid from the EU. It might all be somewhat less flash .... but it might all also be rather less precarious.

 

I know that is not a popular point of view.

 

* I am only saying 'might'.

[Lost Login]

For years the IoM Government have bosted about being aheard of the gave etc, and where has it got us, basically absoultely nowhere.

 

Are you sure? Low unemployment, high gdp per head, expensive facilities vs population. I wouldn't say the successes of the past have got us nowhere.

 

i should have said ahead of the game, but I was talking about recent years when we want to be at the leading edge with regard to tax changes, anti money laundering etc. I am not saying they are bad things but the IoM Govt rushes ahead to implement at the earliest opportunity, certainly ahead of other jurisdictions in the belief that if we are good boys we will be looked on more favourably. In reality we are not whislt putting ourselves at a competitive disadvantgae. For once lets be in the pck and let some other mug put them selves out front to be shot at.

[Tugger]

Can somebody tell me (I don't know the answer honestly) how we coped before zero ten came about in 2006?

 

And if we have to levy e.g. 5% corporate tax, is that such a bad thing, as wouldn't it compare well internationally?

 

My understanding is that the old exempt companies regime (where companies who did business in the Isle of Man were taxed at ten per cent, but "exempt" companies (i.e. those that did no business on the island) were not taxed at all, had been identified as a discriminatory tax practice, so we would have been forced to scrap it in due course any way. The zero ten worked because we could rely on VAT receipts (which we still can of course, just not as much), and had the fortunate consequence of putting pressure on the channel islands.

 

The problem with 5% tax is that the vast majority of companies over here do little except hold assets. If that's all a company is doing, it can do it pretty much anywhere, so as long as there is one offshore jurisdiction offering zero per cent tax, they will all move to it. If we go to 5%, I would expect literally thousands of IOM companies to redomicile to the British Virgin Islands.

 

This is a vast simplification, of course - there are other factors such as double tax treaties, costs, reputation, etc, but tax is a big driver of the CSP/TSP businesses over here, and through them the banks.

[Albert Tatlock]

We are indeed it seems, a rock stuck in-between hard places.

 

The EU documentation talks of a harmful practice as being a tax 'significantly' below that of the country. Well the UK is 28% in terms of CT, so maybe an interesting question at the moment might be 'what figure starts as being not classed as significantly below 28%?'. 5%? 10%? 15%? 20%?

 

General - Corporate, Individual, and VAT rates around the world:

 

Argentina 35% 9-35% 21%

Australia 30% 17-45% 10%GST

Austria 25% 21%-50% 20%

Belgium 33.99% 25-50% 21%

Brazil 34% 7.5-27.5% 17-25%

Bulgaria 10% 10% 20%

BVI - - -

Canada 19.5%(federal) 15-29%(Federal) 5%(gst)

China 25% 5-45% 17%

Croatia 20% 15-45% 23%

Cyprus 10% 20-30% 15%

Czech Rep. 20% 15% 19%

Denmark 25% 38-59% 25%

Egypt 20% 10-20% 10%gst

Estonia 21% 20% 20%

Finland 26% 7.0-30.5% 22%

France 33.33% 5.5-40% 19.6%

Germany 30-33%(effective) 14-45% 19%

Gibraltar 27% 0-40% -

Greece 25% 0-40% 19%

Hong kong 16.5% 2-17% -

Hungary 16% 18% and 36% 25%

India 30-40% 10-30% 12.5%

Indonesia 28% 5-30% 10%

Ireland 12.5% 20-41% 21.5%

Israel 25% 10-45% 16%

Italy 31.4% 23%-43% 20%

Japan 30% 5-50% 5%(consump)

Latvia 15% 23% 21%

Lithuania 20% 15%/20% 19%

Luxemburg 21% 0-38% 15%

Malta 35% 15-35% 18%

Mexico 28% 0-28% 15%

Monaco 33.33% 0% 19.6%

Morocco 35% 0-41.5% 20%

Montenegro 9% 12% 17%

Netherlands 20-25.5% 0-52% 19%

New Zealand 30% 0-39% 12.5%gst

Norway 28% 28-49% 25%

Pakistan 35% 0-25% 15%

Philippines 30% 5-32% 12%

Poland 19% 18%/32% 22%

Portugal 12.5/25% 0-42% 20%

Romania 16% 16% 19%

Russia 20% 13% 18%

Saudi Arabia 20% 20% --

Serbia 10% 10-20% 18%

Singapore 18% 3.5%-20% 7% (gst)

Slovakia 19% 19% 19%

Slovenia 21% 16%-41% 20%

South Africa 28% 0-40% 14%

Spain 30% 24-43% 16%

Sweden 26.3% 0-57% 25%

Taiwan 25% 6-40% 5%

Thailand 30% 5-37% 7%

Tunisia 30% 15-35% 18%

Turkey 20% 15-35% 18%

U.K. 28% 0-40% 17.5%

Ukraine 25% 15% 20%

U.S.A. 15-35% 15-35% -

Vietnam 25% 5-35% 10%

Zambia 35% 0-35% 16%

[manshimajin]

What attracts and retains businesses in a particular location? It will include a mix of some of the following.

• Low tax
  
• Access to skilled and unskilled people
  
• Low costs of employment and living
  
• Access to markets
  
• Costs of establishment
  
• Timely and cost effective transport links
  
• Modern and inexpensive telecommunications
  
• Availability of appropriate business accommodation
  
• Standard of living
  
• Security
  
• Stable political system
  
• Language
  
• Reliable legal system
  
• Low levels of corruption
  
• In Europe - conformity with EU legislation and facility of doing business with Eurzone countries
  

Considering the IOM's competitive position in relation to this list, without an attractive tax position we are very weak, not because we don't tick other boxes, but because other countries tick the same boxes and are much more convenient for doing business.

 

The IOMG says in its brochures that:

The Isle of Man is in a unique customs and excise union with the UK. This means all rates of duty, VAT, forms, processes are familiar and proven, giving simplified access to the UK and the rest of Europe but in a low tax environment. The best of both worlds.

i.e. without the low tax why locate here...

 

Given that over the years we have developed such a heavy reliance on taxation as a key area of competitive advantage it is actually quite frightening to read in the ToR:

it is important that the Isle of Man should develop rapidly a far more comprehensive understanding of the business tax systems in the EU and the major trends in EU-wide tax policy.

I think that the pressure coming onto us in this area needs to be viewed in context with the growing pressures to reduce services and/or increase personal tax which presumably further reduce attractiveness. 'Special pleading' is unlikely to have much impact in the current economic envronment.

 

If a 5% corporate tax rate is not seen as competitive as suggested above then what do we have to offer?

[P.K.]

Strange. I didn't see any mention of tinkering with zero / ten in Allan Bell's recent budget. You know, the one that is a "Five year plan". Oh yes.

 

Unless, of course, it is the "Manx government long-term plan" to deal with the hole in the finances that grows with every new CS / PS pension.

 

The "consultation" should be a good laugh though. Here, I'll save them a couple of bob, God knows they need it...

 

Q : "If we raise your tax bill will you move your business to sunnier climes?"

 

A : "Are you fucking kidding me or what?"

 

In the land of the blind...

[theambo]

Strange. I didn't see any mention of tinkering with zero / ten in Allan Bell's recent budget. You know, the one that is a "Five year plan". Oh yes.

 

Unless, of course, it is the "Manx government long-term plan" to deal with the hole in the finances that grows with every new CS / PS pension.

 

The "consultation" should be a good laugh though. Here, I'll save them a couple of bob, God knows they need it...

 

Q : "If we raise your tax bill will you move your business to sunnier climes?"

 

A : "Are you fucking kidding me or what?"

 

In the land of the blind...

 

It was one of the early things he said, although quickly glossed over and not really picked up by the press.

 

Page six of the budget speech: http://www.gov.im/lib/docs/treasury/budget/2010/budgetspeech2010.pdf

 

I fully agree with your synopsis of the consultation....

[Tugger]

Of greater interest is whether the OECD/EU will force all the offshores to raise their corporation tax rates. That way, we still could remain competitive. I'm not quite sure of the constitutional basis for this (which might be a weakness), but if the UK government wants to plug tax leakage, it won't do so at all by making the IOM charge corporation tax (because they will skip off to the BVI).

[Albert Tatlock]

Of greater interest is whether the OECD/EU will force all the offshores to raise their corporation tax rates. That way, we still could remain competitive. I'm not quite sure of the constitutional basis for this (which might be a weakness), but if the UK government wants to plug tax leakage, it won't do so at all by making the IOM charge corporation tax (because they will skip off to the BVI).

Are not the BVI tied to the UK in much the way we are i.e. governor, queen etc? Can the EU/UK not put just as much pressure on them as us, if push comes to shove - given their constitutional relationship?