IoM To Support Jobs With Tax Reforms
by Jason Gorringe, Lowtax.net, London
26 February, 2014
The Isle of Man's 2014/15 budget, presented to parliament by Treasury Minister Eddie Teare on February 18, 2014, includes an increase to income tax personal allowances among a raft of measures intended to assist the working population.
The income tax personal allowances are to be lifted by two percent to GBP9,500 (USD15,792) for individuals and to GBP19,000 for jointly assessed couples. This is the first hike in income tax personal allowances for three years, and will result in the removal of more than 250 people from the tax net. The move, combined with an exemption from income tax for the Employed Person's Allowance, is intended to benefit low-income working families, whose living standards have declined faster than those on benefits, as a result of inflation.
Teare said: "Our economy needs to grow and provide our community with opportunities to work, especially for the young, and we need to reward work by retaining low and competitive rates of taxation."
Teare also said there will be a reduction in the Additional Personal Allowance for over-65s, from GBP2,020 to GBP1,000 – a measure aimed at redressing the disparity in living standards between low-income workers and those on pensions.
"Whilst individuals in employment have continually been asked to pay more tax with reduced tax relief for certain allowable deductions at a time of static salaries, those in our community who have retired have enjoyed regular annual increases in their pensions," Teare explained.
The budget contains no changes to the income tax lower rate (10 percent) or the income tax higher rate (20 percent). Additionally, the threshold at which the higher rate for individuals becomes payable remains at GBP10,500, and the personal allowance credit remains at GBP500.
In keeping with the budget's theme of supporting jobs, the maximum income tax liability, the 'Tax Cap,' is being kept at GBP120,000. The Tax Cap, which was introduced in 2006 as a way of attracting High Net Worth Individuals (HNWIs) to the island, provides the exchequer with an estimated GBP15.8m per annum.
Explaining the Government's decision to retain the existing threshold, Teare said: "The total economic benefit will be much greater in that additional jobs will be created and supported elsewhere in the wider economy," Teare said, in the future, that a five-year "election" will apply to the Tax Cap, requiring wealthy individuals to pay a set amount for five consecutive years, even if their income decreases.
The Government intends to cut spending by GBP4.3m next year, to GBP543.6m, to support the rebalancing of the budget by 2015/16.
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