The Isle of Man: you decide

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I received a comment yesterday evening on this blog suggesting |I have got the basis of calculation for the Isle of Man / UK VAT Common Purse Agreement wrong, meaning that my claim that the IoM will be claiming substantial additional VAT from the UK is wrong. The commentator is, of course, hiding behind a pseudonym but I have taken him seriously, and my reply, which is worth reproducing in full here as if I am wrong it should be noted that I am wrong, was as follows:

I am intrigued by your comments, and I repeat the suggestion made previously that I am sure you actually work for the Isle of Man Treasury. There are three reasons for thinking so. First, you speak with an assuredness that would be hard to have without doing so. Second, you are clearly familiar with the underlying principles, but third and most important the way you write on the issue suggests that you are so familiar with the issue that you have lost sight of the absurd claims you are actually making.

Let’s deconstruct what you are saying. You accuse me of comparing apples and oranges when plotting the graph of Isle of Man GDP that I plotted – based openly, honestly and appropriately on data published by the IoM Treasury. And yet it’s not me who is doing that – it is you!

But if what you say is true then what the Isle of Man now proposes to do is ignore its new measure of GNI, so carefully produced and trumpeted. It will instead base all VAT claims on GNI for 2006, as updated by percentage annual movements since then.

To understand this – you claim – I have to go back to the sample calculation. That’s here. http://www.taxresearch.org.uk/Documents/IOMGST.jpg And even though this says “obtain latest published national income data” you say that’s not what it means, at all. No, it means 2006 income data is the benchmark for good. And relative change from then are all that matters.

So, for 2008/09 the right data for VAT calculation purposes will not be GNI of £3,414,806. It will be the figure of £1,944,910 as per the sample calculation updated by real growth from 2006/07 as shown by the old method of calculation of perhaps 12.2% as published here http://www.gov.im/treasury/economic/data/income.xml column 4 and then, having utterly ignored the rebasing of 2007/08 what then happens is that the figure for 2007/08 ( £2,183,723 from column 4 in the previous link, presumably) is then adjusted by the decline of 5.5% recorded in the latest figures to give a figure of GNI for the purposes of Vat apportionment calculations alone – which is wholly made up, and according to your new data utterly wrong – for 2008/09 of about £2,063,618 even though the actual number you publish is £3,414,806 – in this case 65% higher?

Is that what you’re really saying?

That’s not, of course, what the sample calculation implies – it says start with the latest data note – and I have relied on that – but if the Treasury in the Isle of Man says it really will be using make belief data of the type you suggest will be used as calculated above – based on a baseline figure which they now say is incorrectly calculated but which you say they are still willing to use albeit that changes will now be measured in oranges even though the original was measured in apples, then of course I have to concede IF they say that that then the Isle of Man will not be claiming any additional VAT from the UK.

But get them to say that categorically first.

And then I’ll say the following:

1. Using wholly artificial data calculated on inconsistent bases, which have changed since the agreement was first reached, is no basis on which to take forward the Common Purse Agreement. So it should be renegotiated.

2. The IoM Treasury spin that there was real growth in the IoM in 2008/09 was misleading – and the people of the IoM should know that – and I’ve done them a service by drawing this to their attention. The economy actually declined in size significantly in the year.

3. Those same people should know that in hard times their government has spent a lot of money producing data which is firstly misleading and secondly so unreliable it can’t be used as the basis for agreeing international obligations with the UK.

4. However, that new data now shows that the people of the Isle of Man are so well off that the remaining subsidy that I have shown still exists in the Common Purse Agreement must be withdrawn by the UK. So the Isle of Man’s spin on this issue will prove to be wholly counterproductive.

5. My exposure of this issue will have been wholly justified in securing a statement from the Treasury which would confirm they will not seek to use the new data to support quite unjustified VAT claims which might otherwise have not been able to protect the UK from such claims.

And without that statement from your Treasury I’ll say something quite different. Which is, of course, that I am almost certainly right and you are planning to make such inappropriate claims.

It’s up to you. Get the Treasury to issue the statement and you can say I got the claim that the IoM will make an excess claim wrong. But then I show how absurd your behaviour has been, and have the satisfaction of taking credit for ensuring you can’t make that claim in future. Don’t issue it and I’ll say you’re going to make that claim.

Which is it going to be? I don’t mind. You might note I win either way.