Tax Capping

How successful has tax capping actually been? Numbers released by Eddie Teare indicated that post the introduction of TC the number of high net worth individuals living here had declined substantially.

About £8 million pa of tax revenue was sacrificed by introducing the policy. This must also have had negative impacts on the money high worth individuals were spending here.

There was virtually no competitive advantage either. The policy was copied almost immediately by the Channel Islands.

Some small steps have been taken to increase the point at which the cap comes into effect. But is it really needed? There would no doubt be some threats of relocation but given the limited tax currently raised from high net worth individuals if a number of them left the increased tax collection from those remaining would compensate. We could then start marketing low tax rather than no tax.

Why the contribution is important

£8 million pa approx was lost by introducing tax capping. Numbers of high worth individuals living here shrank. The flow on benefits to the economy diminished.

Time to get rid of this Bell era sacred cow.

by dpfellows on May 12, 2017 at 05:06PM

Current Rating

2.66666666667
Average score : 2.6
Based on : 3 votes

Comments

  • Posted by studythenumbers May 12, 2017 at 20:04

    I seem to remember reading very positive numbers with regards "Tax Cappers" and their overall contributions to Treasury bank accounts and lots of direct workers.

    It isn't the numbers of people but the quality we should be interested in? Maybe see the Budget for more clarification....it took ages to find this but here it is!

    http://www.tynwald.org.im/[…]/5782.pdf
    Page 70 of 73

    "She mentioned the tax cap. I am delighted she did, because this is a good-news story. What has it generated: 1,750 employed people by tax cappers; tax and National Insurance, £22 million. Isn’t that a good-news story? What would you do if they all left and those jobs went and that tax revenue went? Then we would have a hole in the Budget. Then we would have something seriously to worry about. "
  • Posted by dpfellows May 12, 2017 at 22:18

    Two points about those numbers that indicate your conclusion from them needs careful qualification:

    1. Are you saying that the High Net Worth individuals who lived here prior to the introduction of the tax cap didn't make a similar per capita contribution to the economy in the past? Actually it may have been greater because there were significantly more of them. The numbers you quote lack the credibility of comparing pre and post tax cap contributions to the economy by VHNWIs. They are a selective government answer that only talks about the situation now not the situation before - when more VHNWIs lived here. Provide both sets of data and one tell if the statement is correct or not.

    2. You assume that without a tax cap and with only a low-tax system (as before) people would flee the Island - there is no evidence to support that theory. They fled with a tax cap in place....
  • Posted by studythenumbers May 13, 2017 at 08:25

    I guess some of the answers are out there if we look. Others answers are for the preference of each HNWI. Visit Tynwald/Hansard and search on "tax cap" lots of hits. I narrowed it down and went and looked at a random House of Keys document that appears on page one of the search.

    HOUSE OF KEYS, TUESDAY, 27th MARCH 2012
     "The Minister: The short answer is yes, I am very satisfied this is working out well. There are currently 12 companies owned by tax caps employing 347 employees and in 2010-11 they paid £3.34 million in ITIP and £3.5 million in National Insurance Contributions."

    It's always worth having these important debates.
  • Posted by dpfellows May 13, 2017 at 15:41

    Did the VHNWIs prior to tax capping not own companies, employ people, pay employment taxes, spend money here and contribute in similar ways to the economy plus pay a higher level of tax?

    Eddie Teare made no effort to do a genuine comparison and was, I suspect, attempting to put a positive spin on the significant drop in VHNWIs living here despite tax capping. A genuinely neutral observer would look at the same issues, raised by Eddie only for post capping, for both pre and post. That way a genuine comparison can be made. At the time that was not done.

    In the abscence of data it is reasonable to assume that prior to capping VHNWIs did approximately the same as post capping - but because the numbers were much greater then the total benefit was probably greater.
  • Posted by dpfellows May 13, 2017 at 15:43

    If you go back to Hansard you will also find that Eddie produced numbers that indicated that people on the lowest tax rate only paid on average 3.2% tax, middle income earners 12% and tax cappers 3.8%.
Log in or register to add comments and rate ideas

Idea topics