It was encouraging to hear as the opening gambit in the Treasury Minister’s speech an acceptance of recent events in relation to the VAT revenue sharing arrangement, but a genuine desire to consign it to history and to focus on how real, future growth in the economy can be generated.
Mr Cannan confirmed a 34th consecutive year of economic growth. We do have a tendency to focus on GDP and, whilst it is a positive economic indicator, we should be cognisant of the fact that, given our 0/10 corporate income tax regime, there is not necessarily a correlation between GDP and gross tax receipts. The real issue for our economy over the medium to long term will be economic activity and employment in the real economy, and in particular a focus on sustaining and increasing higher quality employment. The real strength of the economy will rest upon higher value enterprises creating real substance on, and investing in, the Island.
The positive notes were those that could encourage businesses to relocate or set up here, and principally the continuing investment into the Enterprise Development Fund; initiatives in relation to the crowdfunding and alternative banking regimes; new infrastructure investment of around £400m; further investment into the locate.im website, which provides more rounded highlights of the Island and its lifestyle to potential immigrants, points which are often overlooked in favour of the benefits of the tax regime; and further reform in relation to work permits, which will hopefully provide greater flexibility to the Island’s employers.
It is hoped that the increase in the annual tax cap payable for new applications for 2018/19, from £125,000 to £150,000 per annum, and further to £175,000 for 2019/20 and £200,000 with effect from 2020/21, will not prove to be a disincentive to entrepreneurs wishing to relocate or, indeed, those tax-capped individuals who are already here and generating real economic activity. There is a fine balance, but we will still be competitive when compared to other islands.
Other areas of interest included a change to the personal tax allowance, focusing on society at large and ensuring that those on lower incomes will be better off, whilst the middle and higher earners may be slightly worse off due to a reduction in the lower rate band and a further restriction on the deductibility of mortgage interest relief.
Class 2 national insurance contributions are to be scrapped from April 2018 in favour of an increase in the Class 4 contribution for self-employed individuals, aligning the rates to those under Class 1 for employed individuals. The suggestion was that the change would cause “no loss of income to the Manx National Insurance Fund”, when in fact it should lead to an increase in annual receipts.
Overall, the Budget is to be welcomed, with its acceptance that there must be as emphasis of investment in plans and ideas that could stimulate longer-term economic growth for the Island.
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