Isle of Man tax changes could mean offshore exodus

02/09/2010

Changes to the Manx tax regime could spark an exodus of business and jobs from the island, local financial professionals have warned.

If the EU decides that the island's current zero-10 corporate tax regime is 'predatory', as some countries have been claiming, then businesses seeking favourable tax rates will start looking elsewhere – with low tax jurisdictions such as the British Virgin Islands, Bermuda and Singapore expected to benefit.

The problems stem from the Island's decision to cut corporate tax to zero in 2006 for most industries to lure more businesses here – a move that was swiftly followed by the Channel Islands. The EU initially made no objection to the move, until some member states alleged that it was taking money away from them, which prompted a review by the EU Code of Conduct Group.

Approximately 36 per cent of the Island's income is generated through the finance sector, with a further 20 per cent coming from services such as accountancy and law, in which 1,900 Islanders are employed.

Two surveys were carried out by local industry bodies, one for the corporate service provider sector and one for bankers, lawyers, accountants and investment managers.

Malcolm Couch, the assessor of income tax, said in November, when the consultation began, that the end of zero-10 was by no means a certainty. He said if it were to end it could be done gradually.