The Isle of Man is facing its most pressing economic challenge in over a decade. The latest figures confirm a 5% economic contraction, representing a fundamental financial crisis for households and businesses. With the Manx public finances under strain, the time is right for bold action in the forthcoming Isle of Man Government budget.

The Manx TaxPayers’ Alliance continues to lead with positive and sensible policies to reform the Isle of Man and build a better future. These positive reforms for the upcoming budget combine to spur growth, ensure fairness, and safeguard the Island’s long-term prosperity. These measures will help put the Isle of Man on a trajectory to overcome the current economic crisis and rebuild a stable, thriving economy.

1. Restore the Maximum Income Tax Rate to 20%

Alex Allinson’s so-called “temporary” tax hike from 20% to 22% has undermined confidence in the Isle of Man’s tax environment. Reinstating a 20% maximum rate has several benefits:

• Stability & Attraction: A clear, predictable top rate promotes the Island’s reputation as a low-tax, pro-business jurisdiction.
• Incentive for Growth: People and businesses will be more inclined to invest locally if they trust that punitive tax rates will not be imposed.
• Administrative Simplification: Reducing the top rate to 20% and removing the “temporary” distinction eliminates confusion in the tax code, streamlining taxpayer compliance.

Reasoning: Demonstrating a commitment to stable and predictable fiscal policy will improve confidence among investors and business owners. High marginal rates risk dampening economic activity. A single, consistent top rate clarifies the Isle of Man’s intention to remain globally competitive.

2. Remove the National Insurance Holiday for New Migrants

The national insurance holiday for new arrivals was introduced to encourage immigration to fill local employment gaps. However, in the current crisis, it:

• Distorts the Labour Market: Favouring new workers over existing residents can create wage pressures and resentment in the local population.
• Erodes the Tax Base: When government finances are stressed, offering a contribution holiday directly impacts public revenue.
• Raises Equity Concerns: Long-term residents bear the tax burden while newcomers benefit from a reduction.

Reasoning: Removing this holiday ensures that everyone who works on the Island pays their fair share. Rebuilding the economy must rely on broad-based contributions rather than targeted tax breaks that may no longer be justifiable.

3. Remove the 10% Income Tax Band

The 10% band for low-income brackets adds unnecessary complexity to the Manx tax system:

• Tax cut for low-paid: After removing the 10% income tax band, people earning less than the so-called “living wage” will pay no income tax.
• Simplification: With multiple bands, administration costs increase, and taxpayers struggle to plan their finances.
• Policy Clarity: Consolidating into either 0% or 20% bands clarifies what individuals can expect.
• Progressive Yet Fair: Abolishing the 10% rate and raising thresholds (as proposed below) can protect low-income earners while higher earners pay 20%.

Reasoning: The Isle of Man has historically relied on a straightforward tax structure. Removing the 10% rate revives that tradition and removes incremental “cliffs” in the system that often penalise individuals crossing specific thresholds.

4. Increase the Income Tax Threshold to the Living Wage

Raising the personal allowance to at least match the annualised living wage has powerful implications:

• Immediate Relief for Low Earners: By lifting those on the lowest incomes out of taxation entirely, the Island delivers direct financial support to those most affected by the downturn.
• Reduced Administrative Burden: Compliance simplifies when fewer low-wage earners are in the tax system.
• Boost to Consumer Spending: Low earners typically spend a higher proportion of their income on essentials locally, helping rebuild the Island’s economy from the bottom up.

Reasoning: This move is both compassionate and economically stimulating. It mitigates workers’ hardship on the margins while supporting local businesses through increased consumer demand.

5. Require Bus Vannin to Comply with Their Own Budget for Staff Payments

Transport services are critical for maintaining economic and social connectivity, but recent concerns have arisen around Bus Vannin’s staff costs. We propose:

• Strict Enforcement of Budget Limits: The Government must ensure Bus Vannin observes pre-agreed pay structures without renegotiations that exceed authorised spending.
• Accountability in Practice: If Bus Vannin overspends on staff, it must be obligated to release transparent financial statements and justifications, leading to improved public scrutiny.

Reasoning: When a publicly funded body overshoots budgets without recourse, it signals a lack of fiscal discipline. Controlled spending is essential during economic contraction. The Government sets a precedent for responsible stewardship of public funds by enforcing budget discipline.

6. Determine Planning Applications Strictly on the Law, Not Personal Preferences

Planning approval processes must be predictable and fair:

• Objective Standards: Decisions should be anchored in established planning regulations and the Isle of Man Strategic Plan rather than individual tastes or personal biases of the unelected busy-bodies on the Isle of Man planning committee.
• Transparency: Applicants and the public deserve clear, objective reasons for approvals or rejections.
• Encouraging Development: With clear legal criteria, people can provide much-needed housing for humans and make broader investments in housing, commercial structures, and community facilities.
• Higher Standard of Living: Improved housing, commercial, and community facilities will raise people’s living standards through higher wages and better homes.

Reasoning: Investment in property and infrastructure is vital to the Island’s economy, particularly during our current contraction. If planning processes remain opaque and subjective, they deter projects that could create jobs and stimulate growth. An impartial, law-based system is the only way to foster confidence.

7. Sell Government-Owned Derelict Sites in Towns to Offset Interest on the £400m Debt

Government-owned derelict sites across the Isle of Man are a missed opportunity:

• Free Up Capital: Selling these properties would generate funds to offset the interest payments on the £400 million borrowed by the Isle of Man Government.
• Revitalise Urban Areas: Private developers and local businesses can transform these sites into functional housing, commercial spaces, or community facilities, combating blight in town centres.
• Demonstrate Fiscal Responsibility: Actively monetising idle assets shows that the Government is taking steps to rein in borrowing costs and live within its means.

Reasoning: Idle land is effectively a sunk cost. Redeveloping or selling these sites unleashes economic potential, attracting fresh investment while easing the pressure of government debt service. This move directly alleviates budgetary constraints and can stimulate local construction sectors.

8. Integrate the Isle of Man Within the Definition of Domestic UK Flights for Air Passenger Duty

The Isle of Man, though self-governing, depends on strong transport links to the United Kingdom. Being classified outside standard domestic UK air passenger definitions results in higher travel costs because people flying to and from the Isle of Man pay double the duty of people flying within the four nations of the UK:

• Encourage Tourism & Business Travel: Integrating air passenger duty (APD) with UK domestic levels decreases ticket prices, encouraging both inbound and outbound travel.
• Good for Families: Many Manx families have relatives across and off-island. Being able to see relatives more cheaply and more frequently is good for human well-being.
• Stimulate the Economy: More frequent flights at lower costs foster business exchanges, tourist visits, and logistic improvements.
• Level Playing Field: The Isle of Man should be treated consistently with other domestic UK regions to ensure no competitive disadvantage in air travel.

Reasoning: Air travel is a lifeline for our Island. Integrating the Isle of Man’s APD with domestic UK routes supports commerce and leisure travel, preventing the additional friction caused by the Isle of Man’s artificially inflated flight taxes.

9. Remove All APD for Long-Haul and Low Carbon Emission Flights

As an extension to APD reforms, we propose eliminating APD for:

• Long-Haul Flights: Encourages direct global connectivity, essential for business expansions and tourism.
• Low-Carbon Emission Flights: This policy encourages airlines to invest in sustainable aircraft technology, which aligns with environmental goals.

Reasoning: Zero APD for these categories is a targeted approach, leveraging tax policy to spur green innovation while boosting long-range connectivity. It aligns with responsible climate objectives and ensures that the Island remains on the map for international travellers. Currently, no long-haul flights operate from the Isle of Man anyway, so this tax cut would not even cost any revenue. This proposal has no downside.

10. Remove the Regressive TV Tax of the BBC Licence Fee)

The BBC licence fee is widely criticised:

• Regressive Burden: The fee demands the same payment from low-income households as from high-income ones.
• Growing Irrelevance: Consumers are increasingly shifting to digital streaming platforms. Paying a compulsory licence to watch or record live broadcasts is an outdated model.
• Individual Choice: Scrapping the licence fee or making it optional aligns with a modern media environment where viewers choose their preferred providers.
• More Money for Manx media: Households would benefit from having more money to spend as they wish, including on local media outlets

Reasoning: The BBC licence fee is out of step with contemporary viewing habits and most disadvantages low-income families. Removing it would align the Isle of Man with the principle that consumers should pay for the content they want, not forced levies for a single broadcaster.

Conclusion

These proposals align with the twin objectives of fiscal responsibility and economic revitalisation. The Isle of Man is experiencing a critical period of contraction, and the Government Budget must respond with decisive, growth-oriented, and fairness-focused measures.

1. Restoring the 20% income tax cap sends a powerful message that the Isle of Man remains committed to low taxation.
2. Removing arbitrary tax breaks (such as the national insurance holiday and the 10% band) fosters greater equality and simplifies compliance.
3. Raising the personal allowance to the minimum wage protects those most vulnerable in the current downturn.
4. Enforcing budgetary discipline within government-owned entities like Bus Vannin re-establishes trust that public funds are well managed.
5. Objective planning approval processes ensure that development can proceed without bureaucratic caprice.
6. Selling off derelict sites puts dormant assets back into productive use and alleviates pressure from public debt interest.
7. Reforming air passenger duty would foster stronger links with the UK, boost tourism, and encourage the adoption of cleaner aviation technologies.
8. Removing the BBC licence fee recognises that forced charges for content consumption are outdated and regressive in a modern media landscape.

The Manx TaxPayers’ Alliance continues to lead the Isle of Man with these sensible and positive proposals. With these changes, the island can emerge from the current financial crisis on a stronger, more sustainable footing, ensuring the prosperity of current and future generations.

Costing

Many of the proposals above will have either a neutral or positive impact on the Isle of Man Government’s balance sheet. However, the Government recently introduced a new and higher tax rate on large global businesses as part of the Global Minimum Tax on companies. The increased revenue from this new tax rate—which Tynwald has already legislated—will more than offset the cost of the remaining proposals outlined above.

Update: Shortly after publication on 6 February 2025, a typographical error was corrected in section #7: “GGovernmentis” to “Government is”