P&G’s departure won’t hit Isle of Man’s VAT income, says minister

The departure of a multi-national giant from Manx shores will have no effect on our VAT revenue share, Treasury chiefs insist.

As an Isle of Man Examiner investigation revealed back in January 2011, Procter & Gamble’s unassuming office at Brewery Court in Castletown was the unlikely hub of a global shipping empire that paid more VAT than any other company in the island.

It was not in the phone book and there was no P&G sign outside Brewery Court or on the door of the office itself.

But Number 1 Brewery Court, Brewery Wharf, was the base of a subsidiary of the US multi-national Procter and Gamble, manufacturer of numerous household products including Head & Shoulders shampoo, Fairy Liquid, Pringle snacks, Crest toothpaste, Iams pet food and Gillette safety razors.

Procter and Gamble International Operations SA, registered in Switzerland but registered for here for VAT purposes, paid tens of millions of pounds in VAT – tax collected in the island, pooled with the UK and then shared out according to an agreed formula.

Of the £416.3m VAT collected in the island in 2008/09, the top five traders accounted for more than half, some £233.8m – and P&G International Operations topped the list, paying in more than any other company.

It’s not yet known whether the island will lose any more VAT revenue as a result of ongoing negotiations with UK Treasury.

A survey was carried out earlier this of household and business income and expenditure, whose results are being used to determine the island’s share of VAT in the future.

Treasury Minister Eddie Teare said P&G pulled out about 12 months ago as its operation here was deemed too small to fit in with its global portfolio.

He confirmed it had made a ‘massive contribution’ to the island’s VAT receipts.

But he insisted this was VAT collected on behalf of the UK and its departure would not affect our share from the VAT pool as that was determined on VAT consumption not collection.

Mr Teare and assessor of income tax Nicola Guffogg last week attended the Public Accounts Committee’s (PAC) conference on the impact of globalisation on taxation.

Issues of tax avoidance and tax evasion were debated during the event which was attended by UK and international politicians, academics, campaigners, tax experts and business leaders.

It was held the day after a historic moment in Berlin when the Isle of Man became one of 51 signatories to a new global standard of tax information exchange aimed at combating tax evasion.

Mr Teare said while the new international standard was one focus of the PAC conference, the other was the issue of multi-national companies moving profits around jurisdictions to reduce their tax liability.

He said he did not believe the Isle of Man would be affected by measures to clamp down on this practice.