TREASURY Minister Anne Craine MHK has announced the Isle of Man is withdrawing the attribution regime for individuals from April 6 2012.

Mrs Craine 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.

Removing the ARI should end concerns over the Island's Zero-10 company tax system, she said.

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 has been under review since 2008 by the Code Group in order to determine whether it could be considered a harmful measure.