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Isle of Man forced to increase taxes and reduce spending

In a move prompted by the UK government's claw back of £140 million in annual tax receipts, the Isle of Man authorities have confirmed the introduction of higher taxes and reduced public sector spending. Government spending on the island will fall by £49 million a year, almost 10% of the annual budget, by 2015 and the rate of income tax will increase from 18% to 20%.

Last year we saw the UK government clawback a larger proportion of annual tax receipts from the offshore haven with the so called "common purse" set to fall by £85 million in the 2010/11 tax year and £140 million a year into the future. There has been, and continues to be, a very close relationship between the UK government and the Isle of Man authorities but the UK government's attack on various tax havens around the world has taken in the Isle of Man as well.

This is an area of the world which has recorded unbroken economic growth for 26 years although for the first time in living history there is some uncertainty about the island's short to medium term prospects. The authorities on the island have already confirmed they will use up various cash reserves, built up over the years, to smooth the reduction in public sector spending although job cuts in this area have not been ruled out.

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