Positive Action Group - Possan Jantys Jarrooagh

Open, accountable government, rigorous control of public finances, and a fairer society for all.

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Tax Talk: 1. Company Taxation

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In the past PAG has published various articles about the taxation regime in the Isle of Man. We continue this with a couple of more contributions.
 
The first, below, questions the impact of the zero rate of company tax on IOM residents and on the General Revenue Account of the IOM Government.
 
Later, the second will question the quality of some of the enabling IOM legislation.

1. IS IoM COMPANY TAX FAIR?

 

Learning from Mistakes: Black Box thinking

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Observe-Interpret-Intervene-CycleSince becoming Chief Minister, Allan Bell has regularly stated that government must be prepared to take risks. This sentiment has also been supported by Minister for Policy and Reform, John Shimmin and DED Minister, Laurence Skelly. In preparing the ground for the adoption of a £50 million Economic Development package, all three warned that there could well be some failures within the various projects supported under the scheme.

The converse of this argument is for those in power also need to recognise when they have goofed and what's more to learn from the experience. 

Times columnist Mathew Syed succinctly makes the case for a positive attitude to failure in the "Soap Box" feature on BBC 2's Daily Politicson 28.10.15:

 

Public Sector Pensions (Part Two) - The Way Forward

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pensions

The History –The Government Unified Scheme (GUS) was introduced in 2012, following lengthy negotiation with staff.  It simplified the administration of some 15 different public sector pension schemes and increased some employee contributions, but made no substantial difference to their affordability or sustainability, nor indeed their fairness to taxpayers and the private sector. It followed tortuous negotiations with the unions and their members (and at a cost of well over £1 million, paid to the consultants Hymans Robertson). Shortly afterwards, it was proclaimed by government spin as a major success story, quite forgetting both the financial implications and that it constituted a desperately sad situation of "pensions apartheid" - dividing the public sector (where 90% of workers have a salary linked pension heavily subsidised by the taxpayer) against the private sector where less than 50% now apparently have any form of pension scheme applicable at all.

 

Public Sector Pensions– A Review (Part One)

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pensionsThe Problems - Put in its simplest form, the problems with public sector pension schemes are two-fold – their funding arrangements and increasing life expectancy.

  1. The schemes, with defined benefits relating essentially to salary and years of service, have origins dating back to the 1920’s and 1930’s – when life expectancy of approx 60 years was considerably shorter than today’s expectation of perhaps 85 years, and thus pensions – if paid at all - were paid for relatively short periods following retirement. 

  2. As a result, staff pension contributions of typically 5% of pay, and matched by the employer, were historically sufficient to fund the liabilities of these schemes. However, because life expectancy has increased so significantly and so rapidly in the past 2-3 decades (with resultant increases in long-term pension payouts) but with funding arrangements (via employee and employer contributions) having remained unchanged, these schemes are today proving to be too generous, and requiring massive additional “top-ups” from the taxpayer.  They are thus unsustainable.

 

Pink Book reveals IOM Government living beyond its means - PART 1

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The annual IOM budget document is commonly referred to as the Pink Book.
 
Politicians see it about a week before it is presented to Tynwald for debate and ultimately approval. The public has access to it after the Treasury Minister's speech and then read or hear comment in the local media.

One PAG supporter decided to take a detailed look at the figures in the 2014-15 Pink Book and using prudent accounting drew some interesting conclusions:

 

Pink Book reveals IOM Government living beyond its means - PART 2

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Our first article (11/09) created quite a stir and so here are some further thoughts…...

A. Public Sector Pensions - Future Funding

It may be that the the mounting Public Sector Pension crisis is worse than thought.

In a detailed document published by the *Public Sector Pensions Authority, "IOM Government Unified Scheme 2011, Annual Report and Accounts 2012-2013" there is a gloomy set of notes at page 30 about the PSP funding gap. It is expected to "increase as a larger proportion of the Scheme's membership reaches retirement and that additional funding will be required from the Treasury".

It's worth reading this page in the Report, if nothing else.

 
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