Income Tax Capped At £100k

[Snaipyr]

For the economy to continue to prosper could it be a better strategy to attract more people with reasonable incomes who would all be contributing to VAT as well as income tax rather than just a few VHNW people?

If so, I think there is something to be said for the Irish strategy of targeting specific sectors - e.g. creative industries. Film industry is a successful area which could be developed far more. Attracting skilled crews - DP's, cam ops, editors, gaffers etc. to IoM would be a benefit and increase attractiveness for production - not only features, but also tv drama, tv commercials etc. (and increase GDP and VAT revenues that way). It adds to local economy by multiplier effect and provides employment, skills, and has local benefit. (extras, local catering companies, hotels, restaurants, taxis, etc. etc. etc.).

 

However you then run into the 180 day rule. Some of these might be working overseas on location and not qualify, even if genuinely have permanent residence in IoM. NZ has 'permanent place of residence' rule for tax - maybe something along these lines could be interesting.

 

Ireland has suffered substantial job losses over the last few months and it's biting home - RTE news stated today that Ireland is now officially in a recession.

[manshimajin]

Treasury have recruited 49, they hoped for 500

So if those figures are right they have raised £4.9 million - how much have they lost from reducing the tax for existing very high net worth people?

 

If the VAT argument holds true the goal should be to increase population size by a significant number (say 10,000) which would also raise additional income tax. Doing this would stimulate the economy more than having 49 high net worth folk come ing here to live. It would be beneficial for retail (middle income people mostly buy on the Island not New York, Paris, Rome for the VHNWs), it would spread utility costs, create a substantial demand for air and sea transport from them and relatives visiting, give a boost to construction etc etc and still be nowhere as crowded as the Channel Islands. Good planning could mean that we didn't concrete over the whole island too. Would love to see the financial case for doing something to attract middle income earners over here rather than the VHNW and whether it would be a better result for the Island.

[Skeddan]

Would love to see the financial case for doing something to attract middle income earners over here rather than the VHNW and whether it would be a better result for the Island.

manshimajin - I'd suggest looking more broadly at the issue - i.e. at tax breaks in general, and which might offer most bang for buck.

 

Oxford Economics found that the UK film industry costs the tax payer £120m in tax relief and £55m in direct support to film-makers through the Film Council. From this the film industry directly contributes £435m gross in tax, contributes £4.3bn to the economy, employs 35,000 people, and supports 95,000 jobs, and contributed, overall, £1.1bn to the exchequer in tax revenues (multiplier effect). (in addition there are benefits from promoting the country, attracting tourism, low carbon emissions per £1000 in GDP, benefits to retail, transport cos and so forth).

 

Very simplisitically, suppose this was scaled to IoM at 10% - i.e. £12m in tax relief and £5.5m in direct support delivering £43.5m directly and £110m overall in tax revenues and contributing £430m to the economy, and employing 3,500 people and supporting 9,500 jobs. If revenues from VAT agreement is in proportion to GDP, there is even greater benefit.

 

This illustrates that need to look at economic 'multipliers' - as you note, tax breaks for VHNWs may have relatively modest additional benefit beyond the extra VAT revenues (though might give some employment to chauffeurs, pool cleaners, and some menials)

 

Certainly a lot has been done to develop the film industry in IoM, but it is still way behind in terms of tax relief regime, international co-production agreements and needs to tighten up on 'qualifying expenditure' to ensure benefit to local economy. Films are highly sensitive to tax regimes and do locate for financial reasons, so can be attracted, however IoM is becoming less competitive and attractive for productions given tax relief and co-prod treaties available in UK and elsewhere.

 

If provide competitive tax relief, co-prod treaties, and re-invest £5-10m towards construction of large film studio with sound stages, and offer incentives for facilities (digital imaging etc.) and one might expect a great deal more incoming productions and benefit from tax breaks than with VHNWs.

 

See: The Economic Impact of the UK Film Industry

[manshimajin]

manshimajin - I'd suggest looking more broadly at the issue - i.e. at tax breaks in general, and which might offer most bang for buck.

Good point. Combine a corporate tax and incentive regime that attracts employment sectors that make large positive contributions with an income tax regime that attracts large numbers of middle income earners. You could end up with a much better deal than the current limited benefits of the tax break for Very High Net Worth individuals.

 

My fundamental thought was that a larger population of middle income earners would add much more to revenue and business/economic activity on the Island than a few VHNW people.

 

So it might be better to have a really attractive top rate of income tax (or a single 10% rate) than the £100,000 cut off - particularly as this would generate much higher VAT receipts and much higher flow-on employment across the board.

 

Just think that some 'lateral' and creative thinking is needed - particularly in current times.