Congrats to Isle of Man: Zero taxes for the space industry

[Declan McCullagh <declan () well com>]

This reminds me of what Richard Rahn recently wrote in a column:
>             The specific problem of inversion stems from the fact that 
> the U.S. now has the fourth-highest corporate tax rate among the 
> industrialized countries and, unlike most other countries, the U.S. taxes 
> companies on their worldwide income.  A company incorporated in America 
> will pay a corporate tax rate of 35 percent plus an average state 
> corporate tax rate of 5 percent for a total of 40 percent on its 
> worldwide income.  A German, French, Canadian or even Swedish company 
> will pay a lower corporate tax rate on profits earned in their home 
> country, and little or no tax to its home government on any foreign 
> income.  For instance, Ireland has a 12.5 percent corporate tax rate, 
> which means that the German, French or Canadian company only has to pay 
> 12.5 percent on their profits in Ireland, but the American company has to 
> pay 40 percent in tax on its profits in Ireland.  The IRS does allow 
> credit for taxes paid to foreign governments so, in the case of a U.S. 
> company earning $100 of profit in Ireland, it would pay $12.50 in tax to 
> the Irish government, $22.50 to the U.S. government ($35 minus a $12.50 
> credit for the tax paid to Ireland), plus perhaps $5.00 to the government 
> of the U.S. state in which it is incorporated, for a total of $40.
>             The high U.S. corporate tax rate and its worldwide 
> applicability puts American companies at a considerable competitive 
> disadvantage and makes them more vulnerable to takeover by a foreign 
> company.  This is particularly true for U.S. companies with sizable 
> markets in lower-tax countries.  Foreign-based companies with this tax 
> cost advantage will tend to grow faster and gain market share from 
> American competitors.  To offset this competitive disadvantage a number 
> of U.S. companies decided to reincorporate in Bermuda, the Cayman 
> Islands, and other jurisdictions without any corporate income tax.  Under 
> U.S. law, this is perfectly legal because a company need not sell or 
> produce anything in a country that serves as its legal home.

-Declan

---

Date: Tue, 17 Feb 2004 21:47:27 -0800 (PST)
From: Joseph Lorenzo Hall <jhall () sims berkeley edu>
Reply-To: joehall () pobox com
To: Declan McCullagh <declan () well com>, Dave Farber <dave () farber net>
Subject: Isle of Man Government Launches Zero Tax for the Space Industry



Administration Division
Government Offices, Douglas,
Isle of  Man, British Isles.
IM1 3PU


Telephone: (01624) 685586 (01624) 685584
Fax: (01624) 685662

The Treasury

Yn Tashtey
Chief Financial Officer

Mr M Shimmin, CPFA.
Administrator : Miss K Corlett

News Release

Under strict embargo until 11.30 a.m. on Tuesday, 17th February, 2004


ISLE OF MAN LAUNCHES ZERO TAX FOR SPACE INDUSTRY

THE Isle of Man is positioning itself as a centre serving 21st century
technology by extending its zero rate of corporate income tax to
businesses involved in the space and satellite industry.

The move was announced by Island's Treasury Minister Allan Bell when
he presented the Manx Government's annual budget today (Tuesday,
February 17, 2004).

The Isle of Man already has a zero tax regime for a number of
industries - including shipping, insurance and fund management - and
is moving to a standard zero rate for business in 2006.

Said Mr Bell: "I intend to extend the existing zero-rate to new
opportunities as and when they arise. A small but exceedingly
promising area is Space and Satellite Technology. This will encompass
the manufacture, operation, sale or other activities provided in
respect of launch vehicles, satellites or similar assets, including
those educational and other training activities that are directly
associated with the industry.

"A two-day course for representatives from the Island's business
community and other interested parties will be given by the
International Space University from Strasbourg at the International
Business School in May 2004 and will provide an opportunity to impart

detailed knowledge of the space industry and the business
opportunities it affords the Island's economy.

"Companies involved in this high value added category, will from 6
April 2004 be included in the growing number of activities that
already benefit from the zero rate band of tax. I am extremely hopeful
that high technology businesses will look to the Isle of Man as their
preferred location, and know that the Treasury and the Department of
Trade and Industry are working to further develop relations with
several multi-national companies.  One such company that provides a
range of global communications services via its network of satellites
has already established a base on the Island.  Such developments fit
perfectly within our economic plans and are made possible by the new
taxation strategy."

The Isle of Man is a Crown Dependency in the British Isles.  The
Island is one of the world's largest offshore banking, financial
services, and insurance industry centres.  It is also home to a
growing commercial shipping register and a small but focused space and
aerospace manufacturing industry.  The Isle of Man is a member of the
WTO, OECD, IMF, and holds special membership of the EU.

 This year the Isle of Man Government celebrates 1,025 years of
uninterrupted continuous democratic home rule.

Ends

Media enquiries: Alistair Ramsay (44) 1624 686243

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