To some the Manx Budget is a dull affair that has little impact on them. For sure, many of the announcements are close to expectation. But what are the key themes of this and recent Budgets and are the policies backing-up the theme objectives?
To spur economic growth
Business tax rates remain very competitive on the international stage with a zero corporate tax rate for most activities. The Government has also made clear its objective of increasing the working population. The National Insurance holiday scheme announced last year is to be continued in 2020/21. This incentivises new residents and starters, by refunding the first year’s employee NI costs up to a maximum amount.
The new announcement of ‘special treatment of key employees’ to encourage new business and attract entrepreneurs to the island is also good news, all be it the policy is just firming up existing practice. Under this regime, qualifying new residents may benefit from being exempt from tax on earnings other than their Manx employment and any local property income in the first 3 years of Manx tax residence. Conditions exist.
These are just two policies. So arguably Mr. Cannan gets a tick in this category.
Taxation policies that support low to middle income earners
Tax thresholds have increased in recent years to take more people out of the tax net. The announcement to increase the primary threshold at which National Insurance is payable by approximately 10% will hopefully encourage more employment and assist low to middle income earners. Further increases in state pensions is also aimed at helping lower income households.
The increase in the tax cap to £200,000 from £175,000 for individuals (double the amount for jointly taxed) is perhaps an indication of the Treasury Minister seeking a more balanced society, perhaps at the cost of attracting more high net worth individuals to the island.
Clearly there is always more that can be done but perhaps another tick for our Treasury Minister here.
To reduce our reliance on funding from reserves
Use of reserves for 2019/20 are forecast to be £74 million, and this with a very low unemployment rate! Increased finding will be needed to fund the public sector pension funding deficit and to meet the climate change emergency, to name just two areas. The pension deficit is considerable and there is no clear way yet defined to balance the books going forward. New ideas are needed and one possible solution (perhaps partial) to this may come from tax revenue from the proposed gas extraction from local waters. However, there is some resistance to this from the Green Party and their allies. Clearly, the green energy of the future which the island is seeking to move towards, will need funding and getting the balance right between sustainable finances and a low carbon and clean environment will be a significant issue and challenge for this Government.
So, in this area the jury is still out and at this time we cannot give Minister Cannan a tick yet.
For the Pink Book 2020 click ‘here‘.
For the Budget 2020 Practice Note click ‘here‘.
For the Special Treatment of Key Employees Practice Note click ‘here‘.
If you would like to talk to one of our team members about the 2020 Manx Budget, feel free to call us on 679524.