PROPOSALS to tax major UK retailers like Tesco, M&S and B&Q on their local profits were unveiled today by the Isle of Man’s Treasury Minister Eddie Teare in his 2013 budget.
Mr Teare said his second budget was about fairness and setting firm foundations for the future.
The extension of the 10 per cent corporate tax rate (currently covering banking) to major retailers with annual profits of more than £500,000 is expected to raise an additional £3.4 million a year for the Manx exchequer.
Currently, retail giants like Tesco and M&S pay tax on their profits in the UK - and there have long been calls for these companies to pay tax locally.
As expected, there are no changes to income tax rates, personal allowances or thresholds in this year’s budget.
In his budget speech, Mr Teare insisted the government was on course to rebalance its finances in the wake of the VAT bombshell which has resulted in the loss of some £200 million a year in customs receipts since 2009.
That rebalancing will involve taking a scheduled £31 million from reserves in 2013-14, although the amount taken from reserves in the current year is actually less (£47 million compared with the forecast £55 million) thanks to stronger than expected income tax receipts and a £2 million VAT back-payment from the previous year.
The Treasury minister told Tynwald: ‘This year’s budget is entitled Firm Foundations. You need these if you are to build anything that will stand the test of time.
‘We have looked across the whole of government and prioritised spending for the next three years. We now know how we will rebalance the budget by 2015-16. The next two years will be about building that lasting achievement of a re-balanced budget. Our house will be in good order.’
Mr Teare said further savings of £17 million in real terms will be delivered in the coming year, taking total savings since 2010-11 to £79 million.
Health and Social Care are prioritised in overall net spending of £547.9 million which is up 1.6 per cent.
Three-year targets have been published for all government departments. The biggest losers are the departments of Community, Culture and Leisure (down 11.1 per cent over the next three years), and Economic Development (down 5.2 per cent).
Education’s budget actually goes up this year by 3.1 per cent in anticipation of the proposed introduction of tuition fees loans scheme, but over three years its budget will be down by 3.6 per cent.
There is a further planned reduction in the size of the government workforce, by 100 posts a year for the next three years, adding to the 400 posts and 300 staff lost since 2010.
A capital spending programme of £97 million will include £44 million for construction schemes, of which £19 million will be for local authority housing.
As part of the capital programme, the Manx Electricity Authority’s final outstanding debt of £35 million will be paid off.
Mr Teare said a cloud on the horizon was the need to replace capital transfers, with the capital fund reduced to close to zero by 2015-16 and will need to be topped back up by £30 million a year.
Other uncertainties include the impact of FATCA automatic tax information exchange with the US and UK and the impact of banking reforms in the UK.
A new initiative also announced today aims at halving the number of long-term unemployed, to under 100 over the next two years.
The widely-praised National Insurance ‘holiday’ scheme for private sector employers, which has led to the creation of 340 new jobs in its first year, will continue to April 2015.
Also announced today was legislation to stop the avoidance of Manx income tax through personal service companies.
Controversially, perhaps, given the squeeze on many household incomes, the tax cap for the super-rich remains untouched at £120,000.
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Thursday 23 May 2013
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