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Income Tax Improvements 23 January 2004

The Treasury is promoting more legislation to progress the Islandís tax strategy by simplifying the income tax system, making it more efficient and providing for the implementation of international agreements.

The Income Tax (Amendment) Bill 2004, approved by the Council of Ministers for introduction to the House of Keys, is one of a series of Bills designed to deliver the tax strategy agreed by Tynwald.

The Billís measures (subject to approval by the House of Keys and Legislative Council) include:-

  • Extending the current year basis of assessment to all income received by individuals and other non-corporate taxpayers, including income from investments, self-employment and other sources. (Income from employment is already on a current year basis).
  • Two months longer Ė five months instead of three months Ė to make a tax return. But overdue returns will be subject to a new £50 penalty after September 2005 and the Bill also updates offences in relation to returns more than two years overdue.
  • New defined powers for the Assessor of Income Tax to obtain documents including material relevant to the international exchange of tax information on request, in line with the Islandís commitment to the OECD.
  • Provision to prevent the avoidance of Manx tax by company directors, for example, using company loans to exploit the differential between corporate and personal income tax rates.

The Bill also extends personal allowances to non-residents and updates the existing Temporary Taxation Order process, whereby urgent changes to tax law can be introduced through orders approved by Tynwald. Such orders lapse if related primary legislation is not progressed at least to Second Reading stage within 12 months.

Treasury Minister Allan Bell MHK said:

"The Income Tax Amendment Bill continues the modernisation of the Islandís tax system by making it simpler, fairer and consistent with international standards. This is very much in line with the tax strategy approved by Tynwald and significant aspects of the Bill have been flagged up in the past."

Mr Bell added:

"The people of the Isle of Man are entitled to an income tax system that works as efficiently as possible and collects all the money that is owed to public funds. Manx rates are low compared with other countries and it is not unreasonable to expect payment of what is due. It is also important for the reputation and stability of the Island that we have the ability to honour our international agreements."

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