Portfolio feature - Three things the Isle of Man Government must do in 2017
Last year was quite an interesting year on both the local and international political stages – 2017 will undoubtedly be as equally interesting, if not more so. The Island needs to have a positive outlook and take advantage of what lies ahead. Here are three simple things that I think the Isle of Man Government should consider doing in 2017 in order to stimulate the Island’s economy.
Review the changes made to the Tax Cap regime
In 2015 significant changes were made to the Tax Cap regime whereby the Government effectively introduced a five year membership scheme for those wishing to take advantage of the Tax Cap. I believe the thinking behind this decision was flawed and I fear that the introduction of this five year membership has inadvertently seen the Island lose an attractive incentive to wealthy individuals and budding entrepreneurs who would otherwise have been looking to relocate to the Isle of Man. These individuals bring with them a wealth and skill set which would help diversify and stimulate the local economy which in turn would help the Government’s tax take from the many rather than the few!
At the time of the five year introduction I heard representatives from Treasury explaining that this change was not merely aimed at penalising effective tax planning but also to provide certainty to wealthy individuals who wanted assurances that the Tax Cap regime would remain in place for at least five years. If that is the case then I don’t see why the five year membership scheme could not be an “opt-in” scheme rather than compulsory. An “opt-in” scheme would give those looking to relocate to the Island the certainty which they apparently sought whilst also giving others the opportunity to benefit from the Tax Cap in isolated years. I hear the cries that we don’t want the Island to become a target for individuals looking to move here for one to two years simply to benefit from the Tax Cap and then to move on, but a refundable entry charge would protect the Island against such individuals, whilst the opt-in scheme would re-open a Tax Cap regime which, in my opinion, was effectively closed in 2015!
Bring back the 10% charge for property letting companies
The Isle of Man Government should consider bringing back the 10% charge on property letting companies. I believe it was an own goal to increase the corporate tax charge on property rental companies from 10% to 20% and I’d welcome Treasury to swiftly reverse that decision.
At a time where both commercial and residential property markets were showing signs of slowing down, the sector needed initiatives from Government which would stimulate the sector not penalise it. There is a glut of empty office and retail premises on the Island at the moment and I think the Isle of Man is crying out for positive initiatives rather than ones which are focused merely on tackling tax planning initiatives. In my opinion Landlords do not use property companies merely to save tax, the tax saving was simply a benefit which was lost when the tax charge was increased from 10% to 20%. The Island needs these properties occupied, so rather than merely looking to penalise Landlords, I’d like to see the 10% charge re-introduced in order to encourage more Landlords to use the protection of a company which in itself would raise revenue for the Government. Also, I’d like to see Government look at positive steps such as tax breaks for Landlords who are willing to re-negotiate the terms of existing tenancies. For example, if a Landlord is willing to reduce either the term or premium on an existing lease thus allowing a business to continue to trade rather than struggle or close due to a lease which was executed in more favourable times, then I’d like to see those Landlords rewarded by Government. The benefits to the economy would be much greater than the small loss in tax and another empty property!
Consider amending the Work Permit Regime
The Work Permit regime has been high on the business community’s agenda for some time. As a result of low unemployment and a high number of job vacancies, recruitment on the Isle of Man from within the Island’s existing workforce has become increasingly difficult. In such circumstances employers often find themselves having to look beyond the Island to fill these vacancies.
I’m all in favour of a system which protects the Manx workforce and arguably the benefits system, and in the right environment a work permit regime is the perfect form of protection, but in the current climate the work permit regime could be seen as a barrier to entry to the Isle of Man and regretfully the person who ends up paying the price to this barrier to entry is the potential employer. I believe the current system is out dated and needs revision but not removed!
The Isle of Man Government should reward those who are trying to create business and wealth on the Island. The Isle of Man has enjoyed continuous economic growth for the last 30 years, and I see no reason why, with the right Government lead initiatives, we can’t expect this growth to continue in the foreseeable future.