Get the facts right in the Isle of Man

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I have just been interviewed by the Isle of Man Press because of the furore I have caused in the Isle of Man with stories published here. I gather the Isle of Man Treasury are furiously briefing against me. As is usual, their briefings are disingenuous. So let’s get some facts straight.

The claim I have spun the data

The Isle of Man Treasury are going along with the line that I have spun the data on IoM GDP when publishing this graph:

Bluntly this is an untrue allegation. I used their data – published by them on their web site and I make clear that is exactly what I did! It’s the left hand column here.

I used the original GDP data announcement because what we have for 2008/09 now is the first published GDP announcement – no doubt to be revised in due course. But since it is the first announcement it should be compared with other such announcements – which is exactly what I have done. I sought and found a consistent and comparable set of data and used it. To do anything else would have resulted in a comparison of inconsistent data. That is not acceptable.

The allegation that I have spun is not just false – it is blatantly wrong.

I am wrong to say income increased by 27% in 2008/09

Treasury are saying I am wrong to say income increased after restatement by 27%.

This is again utterly disingenuous on their part. The relevant data comes from table 2 on page 5 here and looks like this:

 

The data columns are 2007 original, restated and new method and then 2008/09 new method.

Treasury are saying income fell 5.5% in 2008/09 so the VAT share will go down compared to 2007/08. But this, to put it kindly, is utterly misleading. First, their own story put out for consumption in the IoM is of significant GDP growth – odd that they can spin it both ways! And then there’s the fact that this ignores the restatements in 2007/08. Note I used as my base for estimation the £2,377,247 figure, not the original lower number and compared it with £3,026,577 and this is a 27% jump. So to then say it fell in 2008/09 is absurd – the base increased by at least 27% in 2007/08. My mistake, if I made one was to use GDP as the denominator so I could pick the smallest inflator I could (because I’m a reasonable man). If I’d used GNI instead – as is relevant for VAT the increase was 56% in 2007/08. On that basis the VAT reclaimed will be over £120 million  almost the whole sum lost in October 2009 by strange coincidence

The ONS say the data is right

The IoM Treasury is saying the ONS approve of what they are doing.

I haven’t said otherwise.

But I have pointed out that saying you’ve consulted with someone is not the same as having the consultant say they approve what you have done.

If the ONS say this data is right get them to put it in writing before using their support as an argument, I say. I once advised the States of Jersey  on tax after all. I told them they’d got it all wrong. They could have said they’d consulted me when pursuing their plan. It would not have meant I had approved their plan. So please – if this claim is justified, prove it is all I am saying.

This is all about an argument on data

Well, yes it is. And no it isn’t. leaving aside the fact that my arguments on data are correct, and those of the Isle of Man Treasury are blatant spin and note that this is not just an argument on data. Even if the data is right the reality is that the use of this new data now, less than a year after the UK government removed a VAT subsidy (and rightly so) to reclaim what will – using the GNI comparative I note above – amount to all the sum lost in 2009 is a cynical political move by the Isle of Man government to which the UK must react.

The reality is, as I noted here, that the IoM government is now saying GDP per head in the IoM is £38,500 a head when the UK equivalent is £23,000 or so. And they are saying for VAT calculation purposes income per head rose from £28,890 to £45,141.

My point is a simple one: there is no way on earth that the UK can, because the Isle of Man has just realised that it’s people are not 25% richer than people in the UK but are actually 96% richer as a result justify giving the Isle of Man a vastly bigger tax subsidy. This is the logic of the mad house! People in the UK are going to see service cuts, falls in benefits, declining pensions and more and the Isle of Man is demanding a subsidy form the UK to be a tax haven which undermines UK tax revenue and all because that, notionally, means the people of the Isle of Man are nearly twice as rich as the UK population as a whole. Politically, economically and ethically there is no justification for this, at all.

And I believe that this claim has been cynically manipulated by the Isle of Man government now – whether the data is precisely right or wrong does not matter – less than 12 month after the UK made an adjustment to stop that subsidy precisely so that the subsidy from the poor of the UK to the rich of the Isle of Man can be restored. And my argument is that this crude political manoeuvring has to be responded to bluntly and straightforwardly with a demand that the Common Purse agreement with the Isle of Man be brought to an end. This is the issue all commentators in the Isle of Man want to ignore. Well, I can assure you it won’t be in the UK.

But the Isle of Man collects more VAT than it keeps so cancelling the Common Purse Agreement won’t pay the UK

This line is spun by the Isle of Man Treasury – and it’s wholly untrue.

If the VAT data they are referring to is right – and I’m not arguing with it – then it means that companies based in the Isle of Man for tax reasons (let’s face it: there is no other reason) are making sales into the UK on which VAT is charged greater than the sum that the Isle of Man government then gets back from the Common Purse.

But that is only possible because of the duality of this situation. In other words, these companies locate in the IoM to be outside the UK for corporation tax and income tax but to be in it for VAT. If the Common Purse was cancelled and the Isle of Man had to charge VAT itself under its own rules then there would be no VAT charged on exports from the IoM to the UK and the VAT would instead be charged ion import into the UK – meaning that this VAT would not then be paid in the IoM but in the UK where it is due. So to claim it is recovered now in the IoM is simply wrong: it isn’t.

And let’s be clear not a lot of VAT would be paid in the IoM if the Common Purse was cancelled. Transport which has grown enormously is largely VAT free. So is finance. So two big industries would contribute nothing in the IoM. In fact VAT yields in the IoM would tumble because VAT is paid on domestic consumption and the truth is that actual personal GNI per head in the IoM is, I suspect, nowhere near £45,000 a head – or £180,000 per family of four. That GNI is largely corporate profits – and VAT is not collected on them. So the data is blatantly wrong in such a distorted economy as the IoM’s to use for VAT apportionment. And it is so obviously wrong that UK civil servants looking for every cut they can will be reading this blog (I suspect – because they do)and thinking ‚Äòit’s time to renegotiate again’ I think. Why not? It’s painless for the UK to do so – because we’d get more VAT in the UK as a result and pay the IoM a lot less.

The IoM had better have some very good arguments to hand, I suggest, because it looks to me like you’ve just shot yourselves in the foot with this crude move. I suspect the Common Purse will be over sooner than you think.

What do I think the Isle of Man should do?

I could say it’s not my concern, but I was asked it none the less by the journalist. I’m simply concerned that the UK is being cheated and that a massive reallocation of state funding due to people who need it in the UK will instead be sent to the Isle of Man if no action is taken.

Do I care if this leaves the Isle of Man with a problem in funding its public services? Well, actually, no, not a lot. Why not? Because you are according to your own data 96% richer per head than the UK. You can fund your own services very comfortably on that basis. You just have to pay tax. That’s all. Like we do. And you have to stop free riding off the UK. That’s all.

If it drives business away from the Isle of Man, so be it. You can take a 50% cut in earnings before I need worry.

If your rich have to actually pay tax – so what? So they should.

If companies who abuse other states by using the ring fences you (illegally under EU law) offer have to pay tax – so what? So they should.

All I’m saying is simply this: stop cheating; stop abusing; stop claiming what is not yours; stop demanding the poor of other countries support you; stop demanding state subsidies (which is what you are doing now); simply stand on your own feet if that’s what you want to do.

But right now you do want to live off the state: the UK state. And that’s not acceptable. In fact, it’s game over – and I’m suggesting your attempts to make unacceptable claims for benefits to which you are not entitled might have ended your culture of living on UK state hand outs for good.