Fears have been raised that the island’s new financial strategy has been set to favour the rich.

The Isle of Man’s tax cap is currently set at a rate of £200,000, meaning those on high incomes can set their tax at this fixed amount for a period of five or ten years.

In contrast, it was announced in February that the higher rate of personal income tax is set to rise by 2% - from 20% to 22% - in April as part of the annual budget, a move which critics have said will pile further financial pressure on working families.

And during Tuesday’s House of Keys sitting, Joney Faragher, MHK for Douglas East, pressed further Treasury Minister Dr Alex Allinson on the controversial change.

She quizzed the Minister on whether the island’s new budget had been ‘framed’ to favour high earners, given the fact that they wouldn’t be hit by tax rises as under the island’s latest financial plan.

Treasury Minister Dr Alex Allinson replied: ‘The reason to set it to five or ten years is to lock people into their commitment to pay the £200,000. Previous to that, people could opt in certain years to use the system, particularly those who got intermittent dividends from large companies.

‘I think this is a much fairer way in terms of providing that stability, both for the individuals involved and also in terms of government revenue.’

Dr Allinson said that the tax cap arrangement is beneficial for the island’s economy, due to how much money those on high incomes bring in.

He said: ‘When the tax cap was first introduced in 2006, the objectives were clear. Firstly, it was to encourage entrepreneurs and high net worth individuals to relocate their wealth and business to the island, and secondly, to encourage existing residents to restructure their financial affairs and bring wealth back to the island.

‘In the 2023/24 tax year, there were 58 tax caps on the island, with 51 of these capped at the rate of £200,000.

‘There are 72,000 people registered for tax on the island, so you can see the very small proportion of those involved in the tax cap. These people contribute £11.2 million a year in tax.’

David Ashford, MHK for Douglas North, asked Dr Allinson if there had been a review into how beneficial the tax cap has been for the island’s economy.

He replied: ‘The most tax caps registered in a single year was 96 during the 2012/13 tax year, so there’s been a large decrease in those using it.

‘Because of this, it is difficult to know exactly what the economic benefits have been since its introduction.

‘We do have to recognise that there’s a large proportion of people with significant wealth on the island who do actually benefit the economy by investing in local businesses and property development.

‘This includes the re-development of Mount Murray, the development of a new hotel and bar in Castletown and the transformation of Regent Street Post Office into a bar.’