The Treasury Minister has rejected a former tax official’s suggestion that the island is going bust.

And Alfred Cannan warned that making changes to the corporate tax regime risked the flight of companies to more competitive jurisdictions, resulting in the loss of revenue and jobs.

He was responding to a call from former assessor of income tax Mark Solly for a review of the island’s income tax system - with a view to bringing greater fairness and securing more much-needed revenue for government.

Mr Solly believes a working party or commission should be set up to devise a ’fair tax strategy for the future’ and told Tuesday’s Isle of Man Examiner: ’We are going bust and have to do something about it.’

But Mr Cannan responded: ’We are not going bust. The government is spending more than it collects in revenue but we have a five-year plan to address that and we are on track to meet the target of returning our account balance to a positive situation.’

Mr Solly’s criticism is directed at what he calls the ’tax-free facility’ by which individuals can park all or part of their income in a company and so benefit from the zero rate. He believes many millions of pounds of revenue are being lost to government as a result.

But Mr Cannan said: ’There is a lot of hypothetical argument about how much revenue you might recoup if you make changes to the corporate tax rate but you could potentially lose revenue and jobs if companies left to go to more competitive regimes.

’It could cause significant damage to the economy which could result in higher taxes and more people unemployed.

’It’s a balancing act. We want to drive forward a stable tax regime that ensures consumer confidence.’

But Mr Cannan accepted that there are some issues where potentially tax rates are being pursued more aggressively ’than perhaps would be regarded as acceptable’ - but he said this is on nothing like the scale that Mr Solly is suggesting.

He said: ’There are issues that the income tax division are looking carefully at. We will clamp down on aggressive and abusive tax avoidance. We are committed to ensuring people pay their fair rate of tax. In essence, our tax system is fair.

’There are always measures that can be introduced. We are looking at this issue. I have seen some evidence of avoidance planning going on. But I’m not convinced it is of the size and scale that Mr Solly is alluding to.’

But Mr Solly responded: ’The inevitable and legal consequence of the grant by Tynwald of the tax-free facility is not tax avoidance.’

He said those employees and pensioners who are unable to accumulate any part of their income in a company now represent the hard core of Manx income tax payers.

’This is surely about as unfair as it can be,’ he said. ’Tynwald needs to cure one without spoiling the other. Hence, the need for an appropriately qualified commission or working party to explore the options and make recommendations.’