Treasury Minister Allan Bell said he was 'not opposed in principle' to a call for retail giants to pay 10 per cent tax on profits generated in the Island.

But he warned the issue was 'hugely sensitive', with the potential to 'destabilise' the Island's corporate taxation structure.

The call to extend the 10 per cent tax to Tesco, M&S, B&Q and Boots has been made by David Cannan (Michael) who believes it unacceptable that profits accrued by them go directly to the UK where they are taxed for the benefit of the government in Westminster.

He believes the Island could be losing up to £1.5m a year in tax.

Replying to a question from Mr Cannan, Mr Bell said that when Treasury issued a consultation on its zero/10 corporate tax policy in October 2005 it had been the intention to apply the 10 per cent rate to a range of types of company income.

But he added that he had 'little doubt' that if the 10 per cent tax rate had been applied to the retail operations of non-resident companies, it would have led to the Island's zero/10 regime for companies being found to be harmful by the European Union code of conduct group for business taxation.

Mr Bell told MHKs: 'We all recognise that the world of international taxation is vastly different today than it was when we introduced the corporate tax regime in 2006 and that it is subject to continual change.

'Treasury will shortly commence a consultation exercise to review international developments and our business taxation system. Any decisions regarding changes to the business tax system will be made only after extensive and in-depth consultation.

'I am not opposed in principle to (Mr Cannan's] proposal but it is important, in securing the future stability and development of our economy and maintaining the confidence of our business community, that we adopt a measured approach.'

WHAT DO YOU THINK?
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YOUR COMMENTS

The vast majority of shops in Douglas are uk based, not just the bigger ones mentioned, Spar, Waterstones, Burtons, Stead & Simpson etc. does the tax issue not apply to all these too? Surely tax on income locally should be collected locally, whats left ie. profit is up to the directors what they do with it.
T TASH

At the moment all shops which are not owned by Manx residents escape Manx tax on their profits. Also, dividends paid by public companies to non-residents are not subject to Manx tax. Therefore, Manx shops owned by offshore individuals or companies do not pay Manx tax on their profits at all. This is because all Manx trading companies are taxed at 0%, but only Manx resident shareholders are subject to ARI (the new "Attributions Regime for Inviduals"). This applies to big shops like Tesco, Marks and Spencer, etc and smaller shops which are owned as part of a UK group or directly by UK shareholders. (It also applies to all other types of business not just shops.) The owners still pay tax on their profits, but this ends up effectively in the hands of the UK Government rather than the Isle of Man. This doesn't work both ways, and any business established in the UK has to pay UK tax on its profits from that branch, which is how it should be, but the IOM should receive tax in respect of profits from Manx trading concerns. It has not always been like this and this and only came about because of the Zero rate tax for companies legislation, prior to that all companies were subject to Manx tax and non-resident shareholders subject to non-resident tax. Clearly some thinking needs to be done so more tax ends up in the hands of the IOM government not the UK Government whilst not unduly destabilising the Corporate Sector.
CONCERNED

Correction, the Spar is not part of a UK group, but is wholly owned by a Manx Company paying Manx Tax. In response to the CONCERNED comments, you are exactly right. I have a Manx Company and pay taxes on my UK Branch's profits. It stands to reason that these UK based companies should pay Manx Tax or another form of payment that does not jeopardise the corporate tax regime. Think outside the box, the UK Government has dealt several major blows to the IOM economy and residents, lets fight back Tony.
LOCAL BUSINESS AND FAMILY MAN