THE Isle of Man announced that it would be withdrawing the attribution regime for individuals in February.

The then Treasury Minister, Anne Craine MHK, told Tynwald during her Budget speech that the tax anti-avoidance mechanism was likely to be declared harmful under the European Union Code of Conduct for Business Taxation.

She said removing the ARI should end concerns over the Island's Zero-10 company tax system.

The group set up by the European Union to monitor compliance with the Code of Conduct - Code Group - and the EU's Economic and Financial Affairs Council (ECOFIN) had agreed in 2003 that Zero-10 systems were not harmful.

Mrs Craine said: "The Isle of Man Government considers that with the removal of the ARI our business taxation system does not have features which can be considered to be harmful under the provisions of the Code of Conduct and we have today communicated that view to the chair of the Code Group.

"We remain committed to our policy of being a good neighbour which encompasses being responsible to the views of the European Union.

"At the same time the Isle of Man is fiscally independent and participates in the Code of Conduct process on a voluntary basis.

"It is not in the Island's interests to have aspects of our tax system which the EU sees as causing difficulty and so I have taken what I feel is the right course and moved to abolish the ARI."

The ARI is designed to deter local shareholders from avoiding Manx personal tax by rolling up income in companies subject to the 0 per cent tax rate.

This piece of legislation was under review since 2008 by the Code Group in order to determine whether it could be considered a harmful measure.

Update: In February Mrs Craine delivered the Budget for the year. To see this in full click here. In December the EU confirmed the Isle of Man was tax compliant following the removal or ARI. For more on this click here.

This story is part of isleofman.com's Review of the Year 2011.