We cannot tackle our major social issues or improve our citizens lives without a strong economy and we should applaud the hard work and determination to succeed demonstrated by so many across our diverse business sectors. I want to acknowledge the commitment to this Island demonstrated by business entrepreneurs and leaders.

Their hard work means that income tax forecasts continue to exceed budget expectations. This year, income tax receipts are expected to be around £233 million which is £10 million more than our original estimate.

Since this time last year the number of taxpayers has increased by 439, the number of taxpayers in employment has increased by 605 and the number of employers by 73.

Business, wealth creation and the success and opportunities they bring means that this Government and this Treasury will always be receptive and supportive of opportunities for economic growth.

And I want to send this message to business leaders. The Isle of Man will offer you and your businesses stability and support and this government will play its part in supporting you in a changing global landscape. We should all think for the long term, we should commit for the long term and we must work together to tackle problems and shape this island for the future.

Company Taxation

Mr President, I would now like to turn my attention to the taxation of companies.

Last year, I asked the Assessor to review the taxation position of the banks with a view to taxing all banking profits at the 10% rate from this year. The Assessor has informed me that despite initial thoughts, in reality very little extra revenue would be raised by taxing all of the banking profits at the 10% rate as deposit funded lending is already charged at that rate. Also our banks have been restructuring and working towards a new ring fenced model and despite this their tax contribution continues to increase.

Therefore, I see no reason at this time to increase that burden further. Indeed, to do so at this time could have the reverse effect.

I believe the foundation we have built in previous budgets, the measures we are proposing in this Budget, and the strength of our economy will confirm and enhance our status as an island of Enterprise and Opportunity.

Mr President, we can be confident that we are a responsible Island.

We cannot be complacent and must recognise that in an environment of international political and economic turbulence, the environment around is changing and challenging. However, we can be confident that we are meeting our international standards.

Strong Track Record of International Compliance

Mr President, during 2018 a new international tax standard was developed initially by the EU and now by the OECD’s Forum on Harmful Tax Practices. It requires certain companies operating in a no or low corporate income tax jurisdiction, like the Isle of Man, to meet substance requirements.

The Isle of Man is committed to meeting international tax standards and we have a long-standing policy of compliance with those standards set by bodies such as the OECD, the EU and FATF. This work is sometimes complex and time pressured and the results are generally out of our hands. I would like to thank the Assessor and her team for their hard work and dedication over the last 12 months to meet this international deadline. I am sure that we have done as much as possible to ensure that we continue to meet our high standards and stay off any EU blacklist.

It is vital that we all consider the impact the growing number of ongoing and credible external threats pose to the island’s reputation and our economy. We already have our own robust systems in place to tackle tax evasion, money laundering and other financial crime, which meet international standards.

Collectively, we all need to ensure the Isle of Man continues to protect our reputation and our economy going forward.

It is vital that we continue to meet those international standards if we wish to keep our general zero rate of tax for companies and the new substance legislation is now part of that international package. I hope that this will clearly demonstrate our commitment to being at the fore front of being compliant and meeting international standards – building a platform which will continue to attract new business to the Island and also encourage already established business to grow.

Mr President, last year I brought forward a ‘Budget of Substance’ and we have delivered on that. In December we introduced new substance legislation which requires corporate taxpayers to have adequate substance in the island including having an adequate number of employees and a physical presence here. Not only does this legislation encourage real companies with real jobs to be based on the island but it also ensures ongoing compliance with EU requirements.

In this budget we have provided almost £400,000 of extra resources for our Income Tax and Customs Divisions to bolster their international compliance teams.

Within the Income Tax Division, additional funding has been provided for resources to ensure that the island’s tax system addresses EU and international requirements in relation to substance. A project was approved by the National Strategy Group in 2018 and new primary legislation introduced in December 2018. A redesigned online corporate tax return, together with new processes and staff will be required in 2019 to ensure the Income Tax Division is fully equipped to implement, monitor and enforce the new requirements.

Following the publication of the so called “Paradise Papers” in November 2017, the Treasury invited HM Revenue and Customs to review our processes in relation to aircraft and yachts. As a result of that review being requested, IOM Customs & Excise undertook an internal review in relation to the VAT Treatment and ongoing assessment of Aircraft. That resulted in the need for additional staff to undertake this work and it has been considered necessary for us to commit to these staffing levels for the longer term to avoid any doubts about our ability to assess future aircraft liabilities.

Additionally, the Customs & Excise budget has been increased to strengthen its Law Enforcement team. This will ensure the Division is prepared for the UK’s exit from the EU and ensure that the recommendations of MONEYVAL are fully incorporated into every day activity.

In further support of our commitment to meet our international obligations, this Budget provides an extra £297,000 to establish the International Cooperation & Asset Recovery Team on a permanent basis, after an initial successful pilot scheme. This is to allow the team to be resourced to adopt a zero tolerance in relation to money laundering and preventing terrorist financing.

In 2017/18 £148,989 was confiscated from 18 cases and £536,369 forfeited under the civil cash seizure regimes. Similar success is being experienced during 2018/19.

On top of this £707,000 of capital funding has been provided for the procurement of a system to enable digital searching of information to facilitate timely Anti-Money Laundering (AML) and Combatting of Financing Terrorism (CFT) investigations.