THIS week’s £75m VAT grab by the UK will hopefully signal the end of the attack on the Manx economy from Westminster.
The UK says the new VAT agreement is much fairer – and has indicated it won’t now need to return to reduce our share any further.
A UK Treasury spokesman told the Manx Independent: ‘The government welcomes the recognition by the Isle of Man that the previous revenue-sharing formula was not sustainable and we are pleased that a new formula has been agreed, following robust negotiations.
‘We hope that it provides a stable and secure basis for the long term future of the Customs and Excise Agreement between the United Kingdom and the Isle of Man.’
The UK is taking a further £75m from Manx coffers in the VAT grab.
Richard Murphy, a blogger who campaigned against the old agreement, celebrated the new deal and this week said his campaign was now over.
Manx Treasury Minister Anne Craine MHK said the new agreement had been confirmed only at her meeting with Exchequer Secretary to HM Treasury David Gauke on Wednesday last week – and the deal had yet to be signed.
The UK Treasury said the new formula represented a ‘much fairer’ revenue split, while also providing the Isle of Man with generous transitional payments. It said the new agreement was intended to give the Isle of Man the revenue that ‘they would collect if they ran their own indirect tax system’ – a policy goal which Mr Gauke first confirmed in the House of Commons in November last year.
The UK Treasury said the new formula provided the Isle of Man with a share of joint indirect tax revenues very similar to that which the government expected when the last formula was agreed in 2009. But it said when, last year, the way in which the Isle of Man’s national income was measured was revised to more closely follow international standards, this led to an ‘unsustainable’ increase in the island’s share of joint revenues.
As such, there was little change to the amount that the UK Government received from the Isle of Man compared with what the UK forecast when the last formula was agreed.
But the UK Treasury said it expected the formula, which more ‘accurately’ measured the Isle of Man’s VAT base, would be expected to raise about £250m for the island in 2013/14.