Income Tax Capped At £100k

[Sebrof]

As I have been involved in doing some work on this over the past few months the following may help those of you who dont appear to have grasped this tax scenario.

 

This 100K tax cap is in relation to the ammount of tax paid and not your income ie maximum tax to be paid by an IOM Resident is 100k. Tax is not just paid on your yearly earnings but your income from all sources such as interest and investments, so you dont need just to be earning as a salary 750K per year as a salary to hit the max tax cap.

Dont underestimate the benefit to a high net worth individual of moving here. For example in a recent player transfer to Manchester City it was estimated that Robinios wages would reduce from 6 million to 4 million due to tax.

 

The benefit to the Isle of Man is massive and the 100K that our economy gets is peanuts in the scope of things. VAT is the big area we benefit from and that has nothing to do with what they spend when they are here but the new arrangement with the UK Government on our VAT reciepts which is now based on our GDP. Therefore a high wealth individual who is worth say 20 million will produce approx 1 million in additional VAT reciepts.

 

On paper this 100K tax initiative could be a little gold mine for the Islands Economy but as per usual there is a serious problem in that these individuals who want to move here cant find suitable properties to buy and our Planning Department do not see the granting of planning permission for large mansions as being in the National Interest. So unless we get some joined up Government this 100K tax initative will fail.

 

That's very interesting - thank you. But I don't fully follow the VAT argument. Are you saying that dividends and interest remitted to the IOM count towards GDP for the purposes of this VAT agreement? Doesn't sound very domestic to me.

 

S

[La_Dolce_Vita]

On paper this 100K tax initiative could be a little gold mine for the Islands Economy but as per usual there is a serious problem in that these individuals who want to move here cant find suitable properties to buy and our Planning Department do not see the granting of planning permission for large mansions as being in the National Interest. So unless we get some joined up Government this 100K tax initative will fail.

 

So am I right in thinking that the main or sole benefit to the Isle of Man is from increased VAT receipts, i.e. a large return of money going to the Manx Government?

[ai_Droid]

So am I right in thinking that the main or sole benefit to the Isle of Man is from increased VAT receipts, i.e. a large return of money going to the Manx Government?

 

Plus the 100k of tax per resident you attract vs what you lost by capping the ones you already have.

[Sebrof]

According to the government, "income from abroad" is classified as a constituent part of GNP, not GDP. So I can't see how the IOM will see greater VAT receipts from the UK as a result of wealthy people coming to the island. Even if they bring cash with them, and put it in the bank, it will still need to be invested overseas, and the return will therefore still be "income from abroad".

 

In his budget speeches, Mr Bell has made no specific mention of higher VAT receipts as a result of the tax cap.

 

But I may be missing something, and should be grateful for enlightenment.

 

I wonder what steps have been taken to get the planning people on board.

 

S

[La_Dolce_Vita]

According to the government, "income from abroad" is classified as a constituent part of GNP, not GDP. So I can't see how the IOM will see greater VAT receipts from the UK as a result of wealthy people coming to the island.

 

But if that is the case and there is no increase in VAT, what benefit does it serve having them over here. Sorry, just a bit confused.

[Sebrof]

According to the government, "income from abroad" is classified as a constituent part of GNP, not GDP. So I can't see how the IOM will see greater VAT receipts from the UK as a result of wealthy people coming to the island.

 

But if that is the case and there is no increase in VAT, what benefit does it serve having them over here. Sorry, just a bit confused.

 

Well, I don't KNOW that there is no increase in VAT receipts. I am seeking clarification.

 

There are a number of potential benefits from the tax cap, other than VAT. First, there will be an increase in income tax receipts if enough people come over to offset the reduction in receipts from existing wealthy residents.

 

Second, these incomers will spend money on the island, to the benefit of local traders, and will provide employment both directly and indirectly.

 

Third, they will almost certainly make considerable use of air and sea transport, thereby making these services more viable.

 

And there are no doubt others.

 

S

[Snaipyr]

What proportion of the year do they have to spend here to qualify as residents? And what checks are made? There's a lot of very expensive houses I know of which seem to be occupied for only a few weeks a year. The owners can't do much spending on the island.

[jimbms]

What proportion of the year do they have to spend here to qualify as residents? And what checks are made? There's a lot of very expensive houses I know of which seem to be occupied for only a few weeks a year. The owners can't do much spending on the island.

Look at it the other way even if they only spend a few days a year here so they can only pay £100k tax bonus some other country aint getting it

[La_Dolce_Vita]

Third, they will almost certainly make considerable use of air and sea transport, thereby making these services more viable.

 

And there are no doubt others.

 

S

 

I would assume the viability that would be tested would be more related to flight than taking the ferry.

 

QUOTE (Snaipyr @ Sep 22 2008, 11:59 PM)

What proportion of the year do they have to spend here to qualify as residents? And what checks are made? There's a lot of very expensive houses I know of which seem to be occupied for only a few weeks a year. The owners can't do much spending on the island.

 

Look at it the other way even if they only spend a few days a year here so they can only pay £100k tax bonus some other country aint getting it

 

But that is the point though, these rich bastards who in no way deserve or should own the assets and money they do can use their financial standing to dodge tax in their own country. I know it benefits the Island but it makes these people even richer.

[jimbms]

Third, they will almost certainly make considerable use of air and sea transport, thereby making these services more viable.

 

And there are no doubt others.

 

S

 

I would assume the viability that would be tested would be more related to flight than taking the ferry.

 

QUOTE (Snaipyr @ Sep 22 2008, 11:59 PM)

What proportion of the year do they have to spend here to qualify as residents? And what checks are made? There's a lot of very expensive houses I know of which seem to be occupied for only a few weeks a year. The owners can't do much spending on the island.

 

Look at it the other way even if they only spend a few days a year here so they can only pay £100k tax bonus some other country aint getting it

 

But that is the point though, these rich bastards who in no way deserve or should own the assets and money they do can use their financial standing to dodge tax in their own country. I know it benefits the Island but it makes these people even richer.

Ok lets stop them doing this then we can all pay 22% tax, end result the poorer are worse off the richer are still loaded, the fact that they deserve it or not doesn't realy matter they have it, it in some way helps us lets live with it.

[Chinahand]

La Dolce Vita - where do you think the line between deserving and not deserving wealth lies?

 

A person writes a book - sits on their own in front of a computer and comes up with a story people like. She takes it to a private publisher - who agrees for £X they will print a run of 10000 books - she spends the money - she flogs them on ebay - some auctions go well and bring in more than cost, some badly and make a loss. But over time by word of mouth the book becomes more and more popular - people want the book and the auctions nearly always make a profit - the money comes rolling in.

 

Is this money deserved - if this person then starts employing an agent, does it suddenly come undeserved? If she's taken on by a publishing house with an advertizing budget? If she sells the rights to a hollywood studio?

 

What about a footballer? He's got a great skill, people will come from far and wide to see this skill, will buy videos charting his success, will idolize him buying a shirt with his number on it and a wealth of memorabilia.

 

Or an inventor who's come up with a design for a new vacumn cleaner and manages to persuade investors to provide the cash to make a prototype which proves the designs superiority, but which is rejected by all the major appliance manufacturers, so he mortgages his house, finds some more people willing to risk their money to support his idea and sets up a company to make it and sell it himself.

 

Or a banker, who meets an inventor who's come up with a great new design and realized its potential and so provides the cash to fund the design.

 

Or an investor who's looked at a companies books, met the executives, viewed their products and come to realize that the company is over valued and so short sells the company and issues a sell order to the general market. The Enron collapse started with one analyst who worked for about a year finding at first scarcely noticable contadictions which over time grew and grew to expose a house of cards built on sand.

 

Can you easily say if any of these people are undeserving?

 

I'm not saying that all is rosy in the world of capitalism, just that to blythly say the rich don't deserve their wealth is as simplistic as saying they all do.

 

How would you propose finding out who deserves the rewards of their efforts? In China they had committees to debate who should paid what - they included such things as class background, attitude, willingness, party loyalty. These committees destroyed wealth on a huge scale, they also killed people by the million.

 

I'm not suggesting you think anything like that, but when you go on about the undeserving rich I wonder how you can make such a statement, is it based solely on bank balance and nothing else, or is their any subtlety in your class warfare.

[Lost Login]

Ok some basic facts. Firstly top rate of tax in the IoM for an individual is 18%.

 

Secondly if there was no Tax cap individuals might still not pay to the Manx Government tax on all their income due to double taxation. i.e. they may have already paid tax on that income in the UK and that would be offset against any Manx liability on the same income. Alternatively the income in their hands may be out of UK post tax income so it has already been taxed in effect it has already been taxed in the UK. e.g. dividends. The idea of the tax cap is that they bring their assets & income into the Manx system, even if it is only to sit in deposit with a bank in the IoM rather than the UK. The bank then makes money on that deposit which the bank then pays tax on in the IoM

 

Thirdly with regard to IoM tax residence you are resident for tax if you spend 180 days or more in the IoM in a tax year. If you spend less then the IoM tax office will happily treat you as tax resident if you submit the relevent papers. That though is fairly irrelevent unless the country you are "leaving" accepts you are no longer tax resident in that country. Therefore just because somebody declares they are resident for tax in the IoM does not mean they automatically are not taxable somewhere else. If it was that easy then we would have millions signed up as being tax resident in the IoM on the back of a weeks holiday here each year

[Skeddan]

La Dolce Vita - where do you think the line between deserving and not deserving wealth lies?

I don't know how LDV would answer, but I think you try and frame the issues over narrowly.

 

There is tendency for wealth to accumulate so rich get richer and poor get poorer, so this ends up being highly concentrated in the hands of a very few. Ultimately the country's economy suffers. This will generally happen when there is no 'redistribution of wealth'. e.g. raising minimum wage generally results in an increase in GDP; people have more disposable income, etc. etc.

 

Chinahand I'm sure you're familiar with the 'tragedy of the commons' - where individual self-interest can ultimately prove to be contrary to everyone's long term interests (even those who gain in short term). Notionally then one might then draw a line between 'toxic' and healthy wealth generation and accumulation.

 

Arguably 'non-deserving wealth' is that which a person would not otherwise keep in a non-toxic system (as perhaps notionally in a system where everyone was acting in enlightened self-interest). In simple terms it is wealth obtained and retained through being a freeloader.

 

What you do about this is a whole other question. But one of the issues is where wealthy use offshoring for purposes of freeloading. Everyone in IoM may benefit short-term, but this may be at the expense of the country the person is 'leaving' / sheltering from. You could say that IoM is just being competitive, and the UK or wherever are capable of dealing with their own 'loopholes'. You could also apply the same principles to argue that IoM is freeloading, and that this is undeserved - or at least an unsustainable and perhaps even ultimately a counter-productive economic strategy which will ultimately go tits up to everyone's cost.

[Twitch]

Ok some basic facts. Firstly top rate of tax in the IoM for an individual is 22%.

 

er...I thought it was 18%.

 

http://www.gov.im/treasury/incometax/secti...ml?menuid=14985

[Lost Login]

It is and I am embarressed about typing 22%. I should read what I post before sending as it appears fingers overtook brain as I had read 22% in this topic and was doing some non resident UK tax calculations also at 22%, so with brain apparently in neutral I ended up typing what I had been working at all morning!

Ok some basic facts. Firstly top rate of tax in the IoM for an individual is 22%.

 

er...I thought it was 18%.

 

http://www.gov.im/treasury/incometax/secti...ml?menuid=14985