Treasury cuts deep into Isle of Man tax revenues

The Isle of Man government has described itself facing an 'unprecedented' budgetary situation after the UK Treasury announced reform of a revenue sharing scheme with the island.

The chief minister on the island believes his government will see revenues slashed by £50m as of April 2010 and then £100m from April 2011. The island's annual budget is just £570m.

Chief Minister Tony Brown put out a statement saying: "Government is confident that the present re-adjustments within the Sharing Arrangement, while causing serious initial budgetary and public service pressures, especially due to the short notice of the changes, will be managed in an orderly fashion and will ultimately leave us stronger and fitter for the future."

The agreement involves the sharing of customs and excise revenues.

The Isle of Man's last accounts show that of its £599m in revenues, £408m comes from customs and excise while just £100m comes from income tax and others taxes.

The annual education budget on the island is just £100m while health and social security cost £250m.