This should end EU concerns over zero/10

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TREASURY Minister Anne Craine believes removal of a taxation measure deemed harmful by the EU should remove international concerns over the island’s zero/10 regime.

The outcome of a meeting of the EU Code of Conduct on Business Taxation Group in the Isle of Man’s Attribution Regime for Individuals (ARI) contains no surprises, Mrs Craine said.

She announced the abolition of ARI in last week’s Budget, in the expectation that the Code Group would rule that the measure amounted to harmful tax competition.

And that’s exactly what happened.

The minister said: ‘Indications from the UK Treasury are that, as expected, the Code Group considers the ARI in combination with the island’s corporate tax system to be harmful.’

Mrs Craine explained that the personal taxation anti-avoidance measure had been under scrutiny by the Code Group, which in 2003 had agreed – along with the EU’s Economic and Financial Affairs Council (ECOFIN) – that zero/10 systems as such were not harmful.

She went on: ‘As we had been anticipating that ARI would be found to be harmful, I moved to abolish it in last week’s Budget. We remain committed to our policy of being a good neighbour, which encompasses being responsive to the views of the European Union. At the same time, the Isle of Man is fiscally independent, and participates in the Code of Conduct process on a voluntary basis.’

The minister concluded: ‘It is not in the island’s interests to have aspects of our tax system which the EU sees as causing difficulty. Removing the ARI should end concerns over the island’s zero/10 company tax system.’

The Code Group is not a decision making body, and will send a report with its recommendations to ECOFIN. Formal notification of ECOFIN’s decision is not expected until after it meets in May or June.

Under zero/10, most companies pay no corporate tax although certain sectors, including banking, pay 10 per cent.