Tax cap makes island competitive, minister says

Alex Allinson was asked when the tax cap would be reviewed in the House of Keys

Removing a tax cap could make the Isle of Man less attractive to high earners looking to relocate, the treasury minister has said.

Alex Allinson MHK told the House of Keys an estimated £11.2m of income tax was generated via the system in the 2022-2023 tax year.

Dr Allinson confirmed the scheme, which allows individuals to elect for their tax to be capped at £200,000 annually, was reviewed annually as part of the budget considerations.

The cap remained in place as it had helped the island to "remain competitive" to attract investment in the island to encourage economic growth, he said.

During the current tax year, 58 people were registered and with 51 paying the £200,000.

The limit was originally set at £100,000 for individuals when introduced in 2006.

A revision of the system in 2014 saw a five-year commitment introduced, and followed by an option to commit to a decade was also brought in in 2020.

Attractiveness

While the treasury minster admitted it was "difficult to be precise" about the benefits to the island, he said "a large proportion of people with significant wealth" contributed to the Manx economy by creating businesses and redeveloping property.

He said examples included the transformation of the Regent Street Post Office in Douglas into a bar and the purchase of the Villiers site nearby.

Dr Allinson said the "removal of or increase in the cap would not necessarily generate significant additional revenue" but it would "reduce our attractiveness to some individuals considering relocating to the Isle of Man".

He said the island needed to "remain competitive" with jurisdictions such as Guernsey and Jersey, who have similar schemes.

Work was also ongoing with the Department for Enterprise to examine "how we can increase inward investment" and the role high earners play in employment, business development and innovation on the island, he added.