The Isle of Man’s share of VAT receipts could go down again, Treasury Minister Eddie Teare MHK has conceded.
Mr Teare was speaking as it was announced that a data collection exercise, that will be used to determine the size of the VAT share in the future, is being widened to cover business revenue and expenditure.
The Manx government has lost about a third of its income following changes to the VAT revenue sharing arrangement.
Mr Teare explained UK Treasury wants the island’s share to be equivalent to what we would receive if we had a stand alone VAT system. We currently get about £270 million.
Mr Teare said: ‘We think that is a reasonable estimate but it may go down. We don’t think it will go down a lot.
‘But we are warning colleagues they need to be careful about their department spending plans as they need to be sure they are based on sound revenue forecasts.’
In January this year, 1,000 households selected at random were asked to complete a record of their income and expenditure. That exercise is now halfway through. Later this month, a similar exercise will begin on the company sector which will include some 200 businesses including leading players in each industry.
Mr Teare described this a ‘technical exercise’ that will provide data that will be analysed by the UK Office of National Statistics to determine our share of the VAT in the medium term.
He said he believed the current formula was ‘quite clear and quite fair.’
Data collected for the VAT exercise will relate to a 12 month period ending in this calendar year.
Government economic advisor Stephen Carse said: ‘We need companies to provide us with a breakdown of their figures relating to revenue and costs. This is so even if a company neither incurs or charges VAT, since we need to build up a quantitative picture across the whole economy.’