Why Does Mann Have Vat?

[cheesemonster2005]

I'm fully aware of the constitutional situation regarding Ellan Vannin and the UK - although I'd always prefer a fully independent nation. Does anyone know why the island has VAT yet the Channel Islands don't? What happens to VAT charged on the island and do you think we'd be better off without it? I dislike indirect taxation with a passion as it's unfair for the majority of people as richer people, although they spend more, often don't spend the same proportion of their income - i.e. they save more money.

 

The only use of indirect taxation I can see is for discouraging or compensating certain activities - like petrol tax; tax on ciggies, alcohol and pot; tax on brothels and so on.

 

Should we get rid of VAT?

 

 

Quote from a financial website telling us that we 'enjoy' a customs union with the UK:

" Unlike Jersey and Guernsey, the Isle of Man enjoys a Customs Union with the UK for VAT purposes (Protocol 3 of the Treaty of Accession, 1972). Significant number of ship and yacht registrations. Growing banking and insurance sector."

[Rhumsaa]

I'm no expert but I believe there is some trade agreement we have that differs from the CI?

 

I think it benefits us more than no VAT...

[ans]

I remember something about the "Treaty of Accession" which has a lot to do with EU benefits and stuff. It's that which makes VAT apply here.

 

Incidentally, Jersey are planning on introducing a VAT in the region of 3-5% from what I recall. This is to make up a shortfall in projected earnings after they move to zero corporate tax.

[Gladys]

I think its to do with the Common Purse Agreement with the UK. As far as I know, the IOM keeps all VAT revenue earned here and it is one of the largest contributors to the coffers. This is why we can introduce zero corporate tax next year; corporation tax is a relatively low contributor. Tax will be collected, I gather, when the profits of a company are passed (or are imputed to have passed) into the hands of the shareholders by way of dividend.

 

Apparently, Jersey is considering introducing some form of VAT to compensate for their introduction of zero corporate tax also.

The IOM set the "gold standard" in responding to calls by the international community (EU or OECD, can't remember which) to eliminate unfair taxation and this has been followed by Jersey. But it is still not clear whether this measure will satisfy that requirement.

 

Indirect taxation has always been considered iniquitous because it doesn't discriminate between those that can and cannot afford it, it's a tax on spending rather than earnings etc. But at the end of the day, the books have to be balanced and, one way or another, the citizens of any jurisdiction have to pay for the public infrastructure that serves them.

 

You know the old saying "two certainties in life, death and taxes"!

[Charles Flynn]

It is a similar argument with rates where a widow can be paying enormous rates compared to the house next door with four salaries or paying a tax such as income tax based on the ability to pay.

 

The IOM has a Customs Agreement linking our VAT rates to the UK. As a result although we are not a member of the EU we have to comply with EU VAT Directives.

 

We are the only offshore financial centre that allows low or zero rate tax companies to operate within the EU VAT system and trade freely within the EU.

 

There seems to be enough expertise on these forums to enable those who need accountancy/legal services to get the answers to everyday questions free. Saves paying £300 per hour.

[TheTool]

The main reason we have VAT is that we get 5% of all the vat earned in the uk each year £650 million pounds a year give or take a few million from the UK.

 

This is how the isle of man government gets the bulk of its money.

 

And this is why the isle of man will never go independant.

[cheesemonster2005]

The main reason we have VAT is that we get 5% of all the vat earned in the uk each year £650 million pounds a year give or take a few million from the UK.

 

This is how the isle of man government gets the bulk of its money.

 

And this is why the isle of man will never go independant.

 

In addition I've also learnt that having VAT is beneficial to companies. By registering their business on Mann they aquire a VAT registration number which allows easier trading throughout the European Union.

[When Skies Are Grey]

There are some substantial beenfits to the IOM being part of the EU for VAT purposes whilst retaining a beneficial corporation/income tax status. It gives us a competetive advantage for certain types of financial cplanning that cant be offered by the likes of Guernsey or Jersey.

 

It is very beneficial for vessel owning structures and if the commercial aircraft registry ever gets going it will facilitate that business too.

 

Finally the IOM has a very beenficial relationship with the UK with regard to the claw back on zero-rated or reverse charged acquisitions which the Treasury would really suffer for if it were removed.

[lectro]

I think you'll find that the Channel Islanders are generally ripped off when it comes to the price of goods. Without the VAT their cost of living should be significantly lower than ours and it's not. It's just as expensive there as it is here.

[crumlin]

Who gets all the tax of Petrol etc, is it th UK and if so why

[Mission]

I think you'll find that the Channel Islanders are generally ripped off when it comes to the price of goods. Without the VAT their cost of living should be significantly lower than ours and it's not. It's just as expensive there as it is here.

 

'Freight Charges' used to make up the difference between UK VAT inclusive and Channel Islands VAT exepmt prices.

 

Petrol was cheaper though, as were fags and booze oh and road tax so hey, if you were a chain smoking, car driving alcoholic you were laughing - hmm hang on... maybe it would work over here after all.

 

[cheesemonster2005]

Who gets all the tax of Petrol etc, is it th UK and if so why

 

I'd be interested in finding out too. I know there's no freedom of government information on the island, un like the UK, but who would you direct a question like this to? I would hope that the fuel duty goes only to the island's coffers.

[When Skies Are Grey]

Why look at one thing in isolation (like fuel duty) as opposed to the bigger picture. If the net position is that VATable activities makes a net gain to the Island's economy then what does it matter what happens to the duty on fuel.

[TheTool]

Well the island does have a good system with the VAT laws but the money the island recives from the 5% of VAT still needs to be spent on the right things.

 

The only problem the island suffers from at the moment is bad government.

 

£419 million was loaned to the MEA now that's what i call a big problem.

[cheesemonster2005]

Well the island does have a good system with the VAT laws but the money the island recives from the 5% of VAT still needs to be spent on the right things.

 

The only problem the island suffers from at the moment is bad government.

 

£419 million was loaned to the MEA now that's what i call a big problem.

We receive 5% of the VAT paid on goods and services? That's a very small amount or do you mean we get 5% while the UK exchequer receives the other 12% making 17%?

 

Why doesn't the island get all of the money?