Speaking at the Junior Chamber of Commerce business breakfast meeting, held at the Hilton Hotel in Douglas last Wednesday, he said that for the last five years most of the budgets were primarily concerned with reducing taxation and complying with new EU regulations.

Mr Bell said that the economy had become stronger and stronger in recent years allowing government to maintain a high level of public services.

But this year the budget signalled a slight change in direction.

'This year the background is somewhat different,' he said.

'In a general sense everything is still going very well, we have a very strong economy and our provisional estimate for the last full year of economic growth is a conservative eight per cent, we think it might even be higher than that when the final figures come in.

'This leaves the Isle of Man very much at the forefront of economic growth anywhere in Europe.

'The main issue though this year is not the tax situation, not the European Union but the renegotiation of the common purse agreement with the UK.'


BUDGET COVERAGE BROUGHT TO YOU BY







He said the agreement was negotiated in 1979 and relates to VAT-sharing scheme which sets the VAT rate at the same level as the UK with revenue going into a common pool.

At the end of the year the Isle of Man gets a proportion of the revenue back on a pro rata basis.

Mr Bell said the scheme had proved 'very beneficial' to the Island and had helped government achieve the zero rate of corporate tax.

'We have been able to ride out any shortfall from corporate taxation, unlike Jersey and Guernsey where they have no VAT and have had to bring in fresh measures and sales tax.'

The Minister said the system had worked in the Island's favour, but in 2005 the UK government merged the customs and excise and revenue departments leading to a review of all existing agreements, including the common purse agreement.

Negotiations between the Island government and the UK began in 2006 and a new deal was reached in the last few weeks.

Mr Bell said VAT will still be pooled with the UK but the deal now introduced new criteria with payments in future being related to GNP.

'This changes the focus of our thinking because in future the higher the growth in the economy the higher our receipts will be in this new arrangement.

'But the new system brings more stability to our system and we ought to be able to plan further ahead.'

Mr Bell also made reference to an article in The Observer newspaper (Sunday March 18) which alleged that UK taxpayers were subsidising tax cuts in the Isle of Man to the tune of £270million a year. The article referred to the VAT sharing scheme.

Speaking to other business breakfast delegates before his speech Mr Bell had pointed out that the article included several inaccuracies, the most glaring being that the Island's population was 26,000.

In his speech Mr Bell said the article had been initiated by the Tax Justice Network which he described as a 'motley crew doing their very best to stir up resentment against not just the Isle of Man but off-shore jurisdictions in general.'

'They (the Tax Justice Network] will use every opportunity to undermine the Island and try to damage our economy,' he said.

'We do need to keep an eye on these sort of bodies as well.'
Speaking after his speech to the Chamber Mr Bell said that the Island was moving into a 'new era'.

'The economy is still growing strongly, government revenues are buoyant, but we are moving into a new era now where we will have steady growth, but not the spectacular windfalls that we have enjoyed on occasions in the past.

'The main thrust of the Budget generally is securing the future, strengthening the foundations by getting government to look in on itself to be more efficient and rising to the challenge of stimulating the economy.'

The Junior Chamber of Commerce business breakfast meeting was held last Wednesday (March 21) and sponsored by Barlcays Isle of Man.