Treasury Minister Alfred Cannan has defended another rise in the tax cap for high net worth individuals.

Following his third Manx Budget Mr Cannan said the measure was in line with his vision of an inclusive society.

Mr Cannan was in an upbeat mood as he addressed 220 members of the business community at a Budget breakfast event organised by the Isle of Man Business Network at the Palace Hotel, Douglas.

Minutes later, he told Business News: ’There is clear evidence that there is a more cohesive feel to the island and confidence in the island from a business and finance perspective.’

The tax cap is rising from £150,000 in 2018/2019 to £175,000 for 2019/2020.

And the plan is for it to eventually rise to £200,000 per annum, the audience at the Palace heard.

This is in line with what Mr Cannan announced last year, when he said it would be £200,000 by the end of the current administration.

The tax cap was £120,000 in 2014, the next three years saw it set at £125,000 before it rose to £125,000 in 2017/2018.

[The tax cap is an upper limit on the amount of income tax a high net worth individual would be expected to pay].

Mr Cannan, MHK for Ayre and Michael, insisted the cap was ’fair and proportional.’

’I think on that basis, and it is a purely political decision, that the tax cap was too low .

’That it needed to rise and we needed to demonstrate across society that this was a fair government and an inclusive government.

’We also need to recognise that still we live in a competitive world as was pointed out to me [at the breakfast].

’My view is that we need high value net worths in the island, ie those who will make an active contribution to our business community and to our social life in the island.’

Earlier, he was asked by a member of the audience at the Budget breakfast whether the change in the tax cap was indicative of a change in policy in regard to taxing high net worth individuals.

The questioner asked: ’Are we not becoming less competitive in terms of other European jurisdictions?’

He referred to Italy which he said has a tax cap of 100,000 euros.

And he said a friend of his had decided to relocate to Portugal where he apparently enjoyed a 10-year tax holiday.

Mr Cannan replied to the questioner by telling the audience at the Palace Hotel: ’I firmly believe we need to build a unified society.

’If you are going to be successful everybody needs to be pulling in the same direction and quite frankly, while the tax cap was a sort of high profile, if you like, policy, nevertheless one had to ask how much value it was bringing to the island.

’And what sort of message it was sending across to the community.

’So there are two perspectives. We felt that it was set at an inappropriate level and needed to rise. And also what we are looking at is high net worths that are going to be active in the local environment, who are going to build businesses and are going to bring their businesses here and employ people and not necessarily sit in the background and not actively contribute to society.

’So I think we are still offering a very attractive rate that will go up to £200,000.

’Effectively what we are saying is that we are setting the value of the tax cap at someone who is earning £1million a year or more.

’I think that’s pretty reasonable.

’And the other point is that even having announced that, we’ve had jobs growth. We have had GDP growth, we’ve had more people in employment and there is no evidence to say that it has been a negative policy and broadly from a community perspective I think it is about building an inclusive society and people at the bottom have to have confidence that people at the top are being treated proportionately fairly.

’It is absolutely right that the tax gap [eventually] goes up to £200,000.

’I’ m not sure I would like to see it rise much more than that but I think I would like to see the focus be about attracting high value entrepreneurs to this island.’

He added: ’We have more taxpayers paying tax, we have more employers registering for paying tax than in the last two budgets.’

The breakfast event was organised by the Isle of Man Business Network and was sponsored by Barclays.

Katie Nicholson, chairman of the business organisation, told Business News the group was delighted by the turn-out of 220 people the morning after the Budget.

She said: ’I think it has been a great event. It was the school half-term so I was slightly concerned when we booked it. But to have 220 men and women here, it was maximum capacity and shows the level of interest from the business community. They wanted to come down and hear the minister talk first hand about what he had to say.

’We see this as our flagship event and is one of our main points of focus for the year.’

Ms Nicholson said in her view it was really important to try and attract Manx graduates to the island and also skilled talent that is needed in the island.

She added: ’There are serious issues with the skills gap and if we really want the economy to grow that is something we really need to focus on.

’We have these great new developments being announced such as North Quay, but we actually need the population to fill those places.

’And also I’m pleased to see the Department for Enterprise still supporting small businesses and money being set aside for financial assistance schemes and also the Enterprise Development Scheme.’

More than £9million was announced in the Budget for the revised Enterprise Development Scheme to open it to a wider range of applicants.

Ms Nicholson said that in the tax cap she said it was important to keep some balance.

’Obviously some people work very hard and they need to be rewarded for that but I think there should definitely be some balance there.’

Funds of £2million are being set aside from the Economic Development Fund to develop the Airport Technology Gateway, which will see the creation of a landscaped business park at the airport.